We have compared the ability of rat liver plasma membranes and isolated hepatocytes to bind and degrade insulin. Isolated cells were prepared in two different ways: by mechanical separation of cells and by collagenase digestion of extracellular matric. In all studies the binding and degradative characteristics of both types of hepatocyte preparations were identical. Furthermore, with one exception, the binding characteristics of membranes and cells were also quite similar. The only exception concerned the amount of insulin bound by hepatocytes as compared to liver membranes. Thus, at concentrations of cells (1.2 times 10(6) cells per milliliter) and membranes (150 mug. protein per milliliter) that gave equal binding at insulin concentrations less than 100 ng./ml., the amount of insulin specifically bound at insulin concentrations greater than 100 ng./ml. was greater with use of hepatocytes. Additional studies indicated that, in contrast to membranes, at the higher insulin concentration only 75 per cent of the previously bound insulin could be recovered from hepatocytes. Thus, a nondissociable component exists; which probably represents intracellular radioactivity and appears to account for the higher specific insulin binding by cells at higher insulin concentrations. When insulin degradation was studied at the above hepatocyte and plasma membrane concentrations, cells degraded 30 per cent more insulin than did membranes. Kinetic analysis of these data revealed that the Km for insulin degradation (5 times 10(-7) M at 37 degrees) was the same for both systems wereas the Vmax was greater with use of hepatocytes. CONCLUSIONS (1) Preparation of hepatocytes by collagenase digestion does not appear to alter insulin binding or degradation; (2) studies of liver membranes and isolated hepatocytes obtained from normal rats should yield similar information about insulin-receptor interaction as long as insulin concentrations less than 100 ng./ml. are used; (3) at very high insulin concentrations, some of the radioactivity appears to enter the cells; (4) the kinetics of insulin degradation by hepatocytes and liver membranes are similar; and (5) insulin degradation appears to be primarily a membrane phenomenon.