The C860S mutation (IRC860S) in the extracellular domain of the insulin receptor beta-subunit has previously been shown to result in an inhibition of insulin receptor internalization. The present work aims at further dissecting the consequences of this mutation not only on insulin receptor internalization, but also on the signaling of the receptor. Following transfection of Chinese hamster ovary (CHO) cells with insulin receptors with the C860S mutation (CHO-IRC860S) and quantitative electron microscopic analysis of [125I]insulin localization in these cells, the inhibition of receptor internalization appears to be due to an inhibition of the lateral translocation of the receptor from microvilli to nonvillous domains of the cell surface. At 37 C, insulin-stimulated insulin receptor substrate-1 (IRS-1) phosphorylation is inhibited by 50% in CHO-IRC860S, whereas Shc phosphorylation remains unaffected. The inhibition of IRS-1 phosphorylation is still present when experiments are conducted at 4 C, a temperature at which insulin receptor internalization is prevented, suggesting that the defect in IRS-1 phosphorylation is not due to the reduced internalization of the receptor. In terms of biological effects, the mutation has negative consequences on insulin-stimulated c-fos expression and DNA synthesis as well as on glycogen synthase activity. Eventually, the events observed are specific for Cys860, as individual substitution of the two more proximal Cys residues (795 and 872) to Ser is not accompanied by any change in either insulin-induced insulin receptor internalization or IRS-1 phosphorylation. Thus, the present analysis of CHO-IRC860S 1) reveals that insulin receptor surface redistribution is not solely dependent on receptor autophosphorylation, 2) emphasizes that IRS-1 phosphorylation is not dependent on receptor internalization and can be triggered from microvilli, and 3) stresses divergent aspects between two of the major signaling pathways of the insulin receptor.