The liver plays a major role in the metabolism of insulin, but the precise cellular mechanisms, the enzymes involved, and the products generated have only recently become clarified. The initial step in insulin degradation by the liver is binding to a cell membrane receptor, following which some insulin is degraded and the products released into the incubation medium, whereas some insulin is internalized and degraded intracellularly. Recently, it has been demonstrated that the degradation of insulin by hepatocytes produces products identical to those generated by the enzyme insulin protease. With both enzyme and intact hepatocytes, two A-chain cleavages and four major and three minor B-chain cleavages occur in intact insulin. It has also been demonstrated that internalized insulin is degraded in early endosomes, primarily by cleavages in the B chain and occurring prior to acidification of the endosome and thus prior to dissociation of insulin from its receptor. The initial cleavages in the B chain of insulin occur in the same sites as are cleaved by insulin protease, supporting a role for this enzyme, both in the extracellular and intracellular metabolism of insulin. These findings also indicate that lysosomes probably play a minor or secondary role for hepatic insulin metabolism.