The processing and trafficking of insulin in cultured rat hepatocytes were studied. A time course of binding of radiolabeled insulin to hepatocytes at 37 C revealed a rapid rise in cell-associated radioactivity that reached a steady state by 20 min. Using an acid medium to extract insulin bound to surface receptors, the time courses of receptor binding and internalization of the ligand were characterized. The earliest event in insulin processing was the binding of insulin to surface receptors, reaching steady state by 20 min with a t1/2 of 4 min. The internalization rate of ligand was initially slower than the binding rate, with a t1/2 of 6 min. Similar internalization rates of the insulin receptor were found by measuring the trypsin sensitivity of hepatocyte insulin receptors covalently occupied with a photo-affinity-labeled derivative of insulin [( 125I]B2 (2-nitro-4-azido-phenylacetyl)Des-PheB1-insulin). At steady state, the internalized ligand and receptor comprised approximately 40-45% of the cell-associated radioactivity. The time course of intracellular degradation was assessed by trichloroacetic acid (TCA) precipitability and Sephadex G-50 gel chromatography of solubilized cells containing only internalized radioactivity. Intracellular TCA-soluble and low mol wt degradation products first appeared by 5 min and were released from the cell 3 min later. Chloroquine (100 microM) completely inhibited the formation of intracellular low mol wt degradation products as well as their appearance in the medium. The release of intracellular radioactivity was assessed by first removing surface-bound insulin with acid extraction. Eighty percent of the intracellular radioactivity was released in 45 min with a t1/2 of 8 min. The released radioactivity was assessed by TCA precipitability and gel chromatography. These results demonstrate that after 20 min, 43% of the released intracellular radioactivity is intact insulin. The percentage of intact insulin released increases in a dose-dependent fashion as the amount of insulin bound and internalized increases. In conclusion, the earliest event in insulin processing is binding to surface receptors. After a short delay, insulin and its receptor are internalized and trafficked into either a chloroquine-sensitive degradative pathway or a chloroquine-insensitive retroendocytotic pathway. The amount of insulin that traverses the nondegradative retroendocytotic pathway is proportional to the amount of insulin bound and internalized by the cell.