We report here a class of thiazolidine-2, 4-diones and 2-thioxothiazolidin-4-ones as potent inhibitors of the lymphoid specific tyrosine phosphatase (Lyp) identified from high throughput screens. Chemical modification by incorporating the known phosphotyrosine (pTyr) mimics led to the discovery of a salicylate-based inhibitor with submicromolar potency.