Most insulin responses correlate well with insulin receptor (IR) Tyr kinase activation; however, critical exceptions to this concept have been presented. Specific IR mutants and stimulatory IR antibodies demonstrate a lack of correlation between IR kinase activity and specific insulin responses in numerous independent studies. IR conformation changes in response to insulin observed with various IR antibodies define an IR kinase-independent signal that alters the C-terminus. IR-related receptors in lower eukaryotes that lack a Tyr kinase point to an alternative mechanism of IR signaling earlier in evolution. However, the implied IR kinase-independent signaling mechanism remained obscure at the molecular level. Here we begin to define the molecular basis of an IR-dependent but IR kinase-independent insulin signal that is equally transmitted by a kinase-inactive mutant IR. This insulin signal results in Tyr phosphorylation and catalytic activation of phosphatase PHLPP1 via a PI 3-kinase-independent, wortmannin-insensitive signaling pathway. Dimerized SH2B1/PSM is a critical activator of the IR kinase and the resulting established insulin signal. In contrast it is an inhibitor of the IR kinase-independent insulin signal and disruption of SH2B1/PSM dimer binding to IR potentiates this signal. Dephosphorylation of Akt2 by PHLPP1 provides an alternative, SH2B1/PSM-regulated insulin-signaling pathway from IR to Akt2 of opposite polarity and distinct from the established PI 3-kinase-dependent signaling pathway via IRS proteins. In combination, both pathways should allow the opposing regulation of Akt2 activity at two phosphorylation sites to specifically define the insulin signal in the background of interfering Akt-regulating signals, such as those controlling cell proliferation and survival.