Insulin receptor substrate-1 (IRS-1) was recently identified as a novel upstream substrate for the insulin-activated protein kinase C (PKC)-zeta. This interaction down-regulates insulin signal transduction under hyper-insulinemic conditions. To clarify the molecular mechanism of this feedback loop, we sought to identify the PKC-zeta phosphorylation sites of IRS-1 and to investigate their biological significance. Upon incubation of recombinant IRS-1 fragments with PKC-zeta, we identified Ser(318) of rat IRS-1 (Ser(323) in human IRS-1) as the major in vitro phosphorylation site (confirmed by mutation of Ser(318) to alanine). To monitor phosphorylation of Ser(318) in cellular extracts, we prepared a polyclonal phosphosite-specific antibody. The biological significance was studied in baby hamster kidney cells stably expressing the insulin receptor (BHK(IR)). Using the phospho-Ser(318)-specific antibody we observed that insulin stimulates phosphorylation of Ser(318) in IRS-1, which is mediated, at least partially, by PKC-zeta. Moreover, we found that the previously described insulin-stimulated, PKC-zeta-mediated inhibition of the interaction of IRS-1 with the insulin receptor and the reduced tyrosine phosphorylation of IRS-1 was abrogated by mutation of IRS-1 Ser(318) to alanine. These results, generated in BHK(IR) cells, suggest that phosphorylation of Ser(318) by PKC-zeta might contribute to the inhibitory effect of prolonged hyperinsulinemia on IRS-1 function.