Serine and threonine phosphorylation has been shown to down-regulate insulin signaling at multiple steps, including the receptor and downstream molecules such as insulin receptor substrate-1 (IRS-1). To further address the mechanism of this regulation at the level of IRS-1, we constructed a double serine mutant of IRS-1: S662A/S731A-IRS-1. The serines 662 and 731 mutated to alanine are surrounding tyrosines Y658 and Y727, respectively. These tyrosines are comprised in YXXM motifs, which are potential binding sites for the p85alpha regulatory subunit of phosphatidylinositol (PI) 3-kinase. In a first series of experiments using the yeast two-hybrid system, we show that IRS-1 interacts with p85alpha, and this interaction depends on tyrosine phosphorylation, as shown with the IRS-1 mutant F18 and 3Y-IRS-1. F18-IRS-1 contains 18 potential tyrosine phosphorylation sites mutated to phenylalanine; three of them, i.e. Y608, 628, and 658, which are potential binding sites for p85alpha, have been added back in the 3Y-IRS-1 mutant. The tyrosine phosphorylation of IRS-1, which is required for the interaction with p85alpha, is thought to occur via endogenous yeast kinases that phosphorylate IRS-1 at least on these PI 3-kinase-binding sites. Next, we show that not only p85alpha but also p55PIK, another regulatory subunit of PI 3-kinase, interacts with IRS-1 in yeast. Interestingly, for both regulatory subunits their interaction with IRS-1 is up-regulated by mutating serines 662 and 731 on IRS-1. In a previous study we found that insulin-stimulated PI 3-kinase activity was increased not only in the presence of S662A/S731A-IRS-1 but also under resting conditions compared with the activity seen with WT-IRS-1. Here we demonstrate in 293-EBNA cells overexpressing S662A/S731A-IRS-1 that insulin-stimulated protein kinase B activity is not augmented, whereas without insulin treatment, basal activity is increased compared with that in cells overexpressing wild-type IRS-1. In conclusion, we have shown that 1) potential serine phosphorylation sites on IRS-1, which are adjacent to YXXM binding motifs for PI 3-kinase, negatively regulate binding of IRS-1 to PI 3-kinase regulatory subunits; and 2) these modulations affect protein kinase B activity.