In this study, we examined the molecular mechanism of myosin-bound protein phosphatase (MBP) regulation by insulin and evaluated the role of MBP in insulin-mediated vasorelaxation. Insulin rapidly stimulated MBP in confluent primary vascular smooth muscle cell (VSMC) cultures. In contrast, VSMCs isolated from diabetic and hypertensive rats exhibited impaired MBP activation by insulin. Insulin-mediated MBP activation was accompanied by a rapid time-dependent reduction in the phosphorylation state of the myosin-bound regulatory subunit (MBS) of MBP. The decrease observed in MBS phosphorylation was due to insulin-induced inhibition of Rho kinase activity. Insulin also prevented a thrombin-mediated increase in Rho kinase activation and abolished the thrombin-induced increase in MBS phosphorylation and MBP inactivation. These data are consistent with the notion that insulin inactivates Rho kinase and decreases MBS phosphorylation to activate MBP in VSMCs. Furthermore, treatment with synthetic inhibitors of phosphatidylinositol-3 kinase (PI3-kinase), nitric oxide synthase (NOS), and cyclic guanosine monophosphate (cGMP) all blocked insulin's effect on MBP activation. We conclude that insulin stimulates MBP via its regulatory subunit, MBS partly by inactivating Rho kinase and stimulating NO/cGMP signaling via PI3-kinase as part of a complex signaling network that controls 20-kDa myosin light chain (MLC20) phosphorylation and VSMC contraction.