Insulin forms a complex with its receptors on the plasma membrane of cells and initiates a series of biochemical events which lead to the hormone's recognized effects^1,2. The exact mechanism that initiates these events is unknown. We previously reported that insulin stimulates the phosphorylation of the 95,000 molecular weight (M_r) (β) subunit of its own receptor in intact cells and proposed that this phosphorylation reaction could be a very early step in insulin action³. To clarify the molecular basis of this reaction, we have now investigated the phosphorylation of insulin receptor in a cell-free system. Using [γ-³²P]ATP in solubilized and partially purified receptor preparations from rat liver plasma membrane, we find that both the α and β subunits of the insulin receptor are phosphorylated. Furthermore, insulin stimulates the incorporation of ³²P into both receptor subunits in a specific and dose-dependent manner. Phosphoamino acid determination of the β subunit after insulin stimulation reveals only phosphotyrosine. These findings suggest that the elements required for phosphorylation are associated with the plasma membrane of the cell and that specific phosphorylation of the insulin receptor on tyrosine residues can be activated in a solubilized preparation.