To assess the role of insulin action and inaction in the liver, immortalized hepatocyte cell lines have been generated from insulin receptor substrate (IRS)-2(-/-) and wild-type mice. Using this model, we have recently demonstrated that the lack of IRS-2 in neonatal hepatocytes resulted in insulin resistance. In the current study, we show that immortalized neonatal hepatocytes undergo apoptosis on serum withdrawal, with caspase-3 activation and DNA laddering occurring earlier in the absence of IRS-2. Insulin rescued wild-type hepatocytes from serum withdrawal-induced caspase-3 activation and DNA fragmentation in a dose-dependent manner, but it failed to rescue hepatocytes lacking IRS-2. In IRS-2(-/-) cells, insulin failed to phosphorylate Bad. Furthermore, in these cells, insulin was unable to translocate Foxo1 from the nucleus to the cytosol. Adenoviral infection of wild-type cells with constitutively active Foxo1 (ADA) induced caspase-8 and caspase-3 activities, proapoptotic gene expression, DNA laddering and apoptosis. Dominant negative Foxo1 regulated the whole pathway in an opposite manner. Prolonged insulin treatment (24 hours) increased expression of antiapoptotic genes (Bcl-xL), downregulated proapoptotic genes (Bim and nuclear Foxo1), and decreased caspase-3 activity in wild-type hepatocytes but not in IRS-2(-/-) cells. Infection of IRS-2(-/-) hepatocytes with adenovirus encoding IRS-2 reconstituted phosphatidylinositol 3-kinase (PI 3-kinase)/Akt/Foxo1 signaling, restored pro- and antiapoptotic gene expression, and decreased caspase-3 activity in response to insulin, thereby blocking apoptosis. In conclusion, IRS-2 signaling is specifically required through PIP3 generation to mediate the survival effects of insulin. Epidermal growth factor, via PIP3/Akt/Foxo1 phosphorylation, was able to rescue IRS-2(-/-) hepatocytes from serum withdrawal-induced apoptosis, modulating pro- and anti-apoptotic gene expression and downregulating caspase-3 activity.