Defects in insulin receptor tyrosine kinase activity have been demonstrated in tissues from insulin resistant subjects, but mutations in the insulin receptor gene are rare. Therefore, other molecules that are capable of modulating the insulin receptor most likely play a major role in insulin resistance. In cultured fibroblasts from an insulin resistant patient with Type 2 diabetes, we first identified membrane glycoprotein PC-1 as an inhibitor of the insulin receptor tyrosine kinase activity. PC-1 is overexpressed in fibroblasts from other insulin resistant subjects, both with and without Type 2 diabetes. PC-1 is a large class II exoprotein whose function is unknown. Studies in muscle and fat of insulin resistant subjects two primary tissues for insulin activation, reveal that elevated levels of PC-1 are inversely correlated with decreased insulin action both in vivo and in vitro. Transfection and expression of PC-1 in cultured cells demonstrate that overexpression of PC-1 produces impairments in insulin receptor tyrosine kinase activity, and the subsequent cellular responses to insulin. These studies indicate, therefore, that PC-1 is a major factor in the etiology of insulin resistance, and is a potential new therapeutic target for anti-diabetic therapy.