The cytoplasmic juxtamembrane domain of the human insulin receptor (hIR) contains a single copy of the tetrameric amino acid sequence Asn-Pro-Glu-Tyr (NPEY) (residues 969-972 in the exon 11-containing B-isoform), which exists in the context of NPXY. In this study, we examined the role of NPEY972 in mediating insulin signal transduction and cellular biological effects. Transfected Chinese hamster ovary cell lines expressing either the wild-type hIR-B isoform (hIR.WT) or a mutant receptor lacking the NPEY972 sequence (hIRDeltaNPEY) and control Chinese hamster ovary.Neo cells were used to comparatively analyze the following insulin effects: in vivo receptor tyrosine autophosphorylation and kinase activity, signal transduction to downstream signaling molecules, and stimulation of glycogen and DNA synthesis. The results showed that in comparison to hIR.WT, the hIRDeltaNPEY mutant demonstrated the following: (a) normal insulin-mediated receptor tyrosine phosphorylation, but approximately 50% reduction in phosphorylation of p185-(insulin receptor substrate-1) and binding of the p85 subunit of phosphatidylinositol 3-kinase (PI 3-kinase), (b) an enhanced stimulation of PI 3-kinase enzymatic activity, (c) a complete inability to phosphorylate Shc, (d) minimal impairment of insulin sensitivity for glycogen synthesis, and (e) an augmented response to insulin-stimulated DNA synthesis via a high capacity, low sensitivity pathway. These results demonstrate the following: 1) the NPEY972 sequence is important but not absolutely essential for coupling of hIR kinase to insulin receptor substrate-1 and p85 or for mediating insulin's metabolic and mitogenic effects, 2) the NPEY972 sequence is necessary for Shc phosphorylation, and 3) the absence of Shc phosphorylation releases the constraints on maximal insulin-stimulated mitogenic response, thus indicating that alternate signaling pathway(s) exist for this insulin action. This alternate pathway appears to be associated with enhanced activation of PI 3-kinase and is of high capacity and low sensitivity.