Molecular dynamics simulations of protein tyrosine phosphatase 1B (PTP1B) complexed with the phosphorylated peptide substrate DADEpYL and the free substrate have been conducted to investigate 1) the physical forces involved in substrate-protein interactions, 2) the importance of enzyme and substrate flexibility for binding, 3) the electrostatic properties of the enzyme, and 4) the contribution from solvation. The simulations were performed for 1 ns, using explicit water molecules. The last 700 ps of the trajectories was used for analysis determining enthalpic and entropic contributions to substrate binding. Based on essential dynamics analysis of the PTP1B/DADEpYL trajectory, it is shown that internal motions in the binding pocket occur in a subspace of only a few degrees of freedom. in particular, relatively large flexibilities are observed along several eigenvectors in the segments: Arg(24)-Ser(28), Pro(38)-Arg(47), and Glu(115)-Gly(117). These motions are correlated to the C- and N-terminal motions of the substrate. Relatively small fluctuations are observed in the region of the consensus active site motif (H/V)CX5R(S/T) and in the region of the WPD loop, which contains the general acid for catalysis. Analysis of the individual enzyme-substrate interaction energies revealed that mainly electrostatic forces contribute to binding. Indeed, calculation of the electrostatic field of the enzyme reveals that only the field surrounding the binding pocket is positive, while the remaining protein surface is characterized by a predominantly negative electrostatic field. This positive electrostatic field attracts negatively charged substrates and could explain the experimentally observed preference of PTP1B for negatively charged substrates like the DADEpYL peptide.