Ubiquitin-protein ligase Cbl-b negatively regulates high affinity IgE receptor (FcepsilonRI)-mediated degranulation and cytokine gene transcription in mast cells. In this study, we have examined the role of a truncated variant of Cbl-b related to the rat model of type 1 diabetes mellitus using the mast cell signaling model. Overexpression of the truncated Cbl-b that lacks the C-terminal region did not suppress the activation of proximal and distal signaling molecules leading to degranulation. FcepsilonRI-mediated tyrosine phosphorylation of Syk, Gab2, and phospholipase C-gamma1, and activation of c-Jun N-terminal kinase (JNK), extracellular signal-regulated kinase (ERK), p38 mitogen-activated protein kinase (MAP kinase), and inhibitor of nuclear factor kappaB kinase (IKK), and generation of Rac1 are unaffected in cells overexpressing the truncated Cbl-b in the lipid raft. On the other hand, FcepsilonRI-mediated transcriptional activation of nuclear factor of activated T cells (NFAT), and transcription of interleukin-3 (IL-3) and IL-4 mRNA are inhibited by overexpression of the truncated variant of Cbl-b. This suppression parallels the re-compartmentalization of specific effector molecules in the lipid raft. These structural and functional analyses reveal the mechanism underlying the selective inhibition of cellular signaling by the truncated variant of Cbl-b related to insulin-dependent diabetes mellitus.