Chronic ethanol exposure inhibits the capacity of the liver to regenerate. Insulin is a potent hepatotrophic factor and it was determined if ethanol interferes with insulin receptor substrate (IRS-1)-protein mediated signal transduction during liver regeneration. Tyrosyl phosphorylation of IRS-1 was strikingly increased prior to the major wave of DNA synthesis in isocaloric pair-fed control rats; a blunted and delayed response was found in ethanol-fed rats. Enzymatic activity of phosphatidylinositol 3-kinase, a Src homology 2 (SH2) domain containing signal transduction molecule was enhanced by the association with tyrosyl phosphorylated IRS-1, whereas in ethanol-fed rats, this activity was greatly diminished and delayed. These results indicate that one potential molecular mechanism whereby ethanol inhibits hepatocyte DNA synthesis is through its action on the IRS-1-mediated signal transduction cascade.