Since the discovery of insulin and its receptor, the downstream elements responsible for the pleiotropic insulin signal have been difficult to define. The recently discovered insulin receptor substrate, IRS-1, provides an innovative and simple way to think about this problem: IRS-1 may mediate the control of various cellular processes by insulin. Overexpression of IRS-1 enhances insulin-stimulated DNA synthesis in Chinese hamster ovary cells, and microinjection of IRS-1 protein potentiates the maturation of Xenopus oocytes. We suspect that insulin signals are enabled when the activated insulin receptor kinase phosphorylates specific tyrosine residues in IRS-1. These phosphorylated sites associate with high affinity to cellular proteins that contain SH2 (src homology-2) domains. This association is specific and depends on the amino acid sequence surrounding the phosphotyrosine residue and the isoform of the SH2 domain. A growing number of SH2 domain-containing proteins have been identified, and we suspect that IRS-1 has the potential to simultaneously regulate many of them. We have only begun to identify the specific proteins that associate with phosphorylated IRS-1. One of them, the phosphatidylinositol 3'-kinase, is activated when the SH2 domains in its 85,000-M(r) regulatory subunit bind to phosphorylated IRS-1. IRS-1 also interacts with other proteins such as SHPTP2, a novel SH2 domain-containing Tyr phosphatase, and GRB-2/sem-5, a protein that is implicated in p21ras signaling. The interaction between phosphorylated IRS-1 and multiple SH2 domain-containing proteins may ultimately explain the pleiotropic effects of insulin.