Despite significant advances in past years on the chemistry and biology of insulin and its receptor, the molecular events that couple the insulin-receptor interaction to the regulation of cellular metabolism remain uncertain. Progress in this area has been complicated by the pleiotropic nature of the actions of insulin. These most likely involve a complex network of pathways resulting in the coordination of mechanistically distinct cellular effects. Because the well-recognized mechanisms of signal transduction (i.e., cyclic nucleotides, ion channels) appear not to be central to insulin action, investigators have searched for a novel second-messenger system. A low-molecular-weight substance has been identified that mimics certain actions of insulin on metabolic enzymes. This substance has an inositol glycan structure, and is produced by the insulin-sensitive hydrolysis of a glycosylphosphatidylinositol in the plasma membrane. This hydrolysis reaction, which is catalyzed by a specific phospholipase C, also results in the production of a structurally distinct diacylglycerol that may selectively regulate one or more of the protein kinases C. The glycosyl-phosphatidylinositol precursor for the inositol glycan enzyme modulator is structurally analogous to the recently described glycosyl-phosphatidylinositol membrane protein anchor. Preliminary studies suggest that a subset of proteins anchored in this fashion may be released from cells by a similar insulin-sensitive phospholipase-catalyzed reaction. Future efforts will focus on the precise role of the metabolism of glycosyl phosphatidylinositols in insulin action.