Metformin is a commonly used anti-diabetic but whether its mechanism involves action on the insulin receptor or on downstream events is still controversial. With a time course that was slow compared with insulin action, metformin increased tyrosine phosphorylation of the regulatory domain of the insulin receptor (specifically, tyrosine residues 1150 and 1151). In a direct action, therapeutic levels of metformin stimulated the tyrosine kinase activity of the soluble intracellular portion of the beta subunit of the human insulin receptor toward a substrate derived from the insulin receptor regulatory domain. However, metformin did not alter the order of substrate phosphorylation by the insulin receptor kinase. Using a Xenopus oocyte preparation, we simultaneously recorded tyrosine kinase and phosphatase activities that regulate the insulin receptor by measuring the tyrosine phosphorylation and dephosphorylation of peptides derived from the regulatory domain of the human insulin receptor. In an indirect stimulation of the insulin receptor, metformin inhibited endogenous tyrosine phosphatases and purified human protein tyrosine phosphatase 1B that dephosphorylate and inhibit the insulin receptor kinase. Thus, there was evidence that metformin acted directly upon the insulin receptor and indirectly through inhibition of tyrosine phosphatases.