Allostery is an inherent feature of proteins, but it remains challenging to reveal the mechanisms by which allosteric signals propagate. A clearer understanding of this intrinsic circuitry would afford new opportunities to modulate protein function. Here, we have identified allosteric sites in protein tyrosine phosphatase 1B (PTP1B) by combining multiple-temperature X-ray crystallography experiments and structure determination from hundreds of individual small-molecule fragment soaks. New modeling approaches reveal ’hidden’ low-occupancy conformational states for protein and ligands. Our results converge on allosteric sites that are conformationally coupled to the active-site WPD loop and are hotspots for fragment binding. Targeting one of these sites with covalently tethered molecules or mutations allosterically inhibits enzyme activity. Overall, this work demonstrates how the ensemble nature of macromolecular structure, revealed here by multitemperature crystallography, can elucidate allosteric mechanisms and open new doors for long-range control of protein function.