The dynamics of the interaction of the insulin receptor with a substrate-trapping mutant of protein-tyrosine phosphatase 1B (PTP1B) were monitored in living human embryonic kidney cells using bioluminescence resonance energy transfer (BRET). Insulin dose-dependently stimulates this interaction, which could be followed in real time for more than 30 minutes. The effect of insulin on the BRET signal could be detected at early time-points (30 seconds), suggesting that in intact cells the tyrosine-kinase activity of the insulin receptor is tightly controlled by PTP1B. Interestingly, the basal (insulin-independent) interaction of the insulin receptor with PTP1B was much weaker with a soluble form of the tyrosine-phosphatase than with the endoplasmic reticulum (ER)-targeted form. Inhibition of insulin-receptor processing using tunicamycin suggests that the basal interaction occurs during insulin-receptor biosynthesis in the ER. Therefore, localization of PTP1B in this compartment might be important for the regulation of insulin receptors during their biosynthesis.