ER-bound PTP1B is expressed in hippocampal neurons, and accumulates among neurite contacts. PTP1B dephosphorylates ß-catenin in N-cadherin complexes ensuring cell-cell adhesion. Here we show that endogenous PTP1B, as well as expressed GFP-PTP1B, are present in dendritic spines of hippocampal neurons in culture. GFP-PTP1B overexpression does not affect filopodial density or length. In contrast, impairment of PTP1B function or genetic PTP1B-deficiency leads to increased filopodia-like dendritic spines and a reduction in mushroom-like spines, while spine density is unaffected. These morphological alterations are accompanied by a disorganization of pre- and post-synapses, as judged by decreased clustering of synapsin-1 and PSD-95, and suggest a dynamic synaptic phenotype. Notably, levels of ß-catenin-Tyr-654 phosphorylation increased ∼5-fold in the hippocampus of adult PTP1B^−/− (KO) mice compared to wild type (WT) mice and this was accompanied by a reduction in the amount of ß-catenin associated with N-cadherin. To determine whether PTP1B-deficiency alters learning and memory, we generated mice lacking PTP1B in the hippocampus and cortex (PTP1B^fl/fl–Emx1-Cre). PTP1B^fl/fl–Emx1-Cre mice displayed improved performance in the Barnes maze (decreased time to find and enter target hole), utilized a more efficient strategy (cued), and had better recall compared to WT controls. Our results implicate PTP1B in structural plasticity within the hippocampus, likely through modulation of N-cadherin function by ensuring dephosphorylation of ß-catenin on Tyr-654. Disruption of hippocampal PTP1B function or expression leads to elongation of dendritic filopodia and improved learning and memory, demonstrating an exciting novel role for this phosphatase.