Insulin receptor tyrosine kinase activation, induced by insulin-stimulated autophosphorylation, was measured using a synthetic peptide containing residues 1142-1153 of the insulin receptor and shown to be reversed by both particulate and soluble phosphotyrosyl protein phosphatases from rat liver. Deactivation of the tyrosine kinase was highly sensitive to phosphatase action and was correlated best with disappearance of insulin receptors triphosphorylated in the tyrosine-1150 domain. Dephosphorylation of the di- and mono-phosphorylated forms of the tyrosine-1150 domain generated during dephosphorylation or of phosphorylation sites in the C-terminal or putative juxta-membrane domains occurred 3- greater than 10-fold more slowly than deactivation of the tyrosine kinase, and these phosphorylated species did not appear to appreciably (less than 20%) contribute to tyrosine kinase activation. These results indicate that the transition from the triply to the doubly phosphorylated form of the tyrosine-1150 domain acts as an important switch for deactivation of the insulin receptor tyrosine kinase during dephosphorylation. The exquisite sensitivity of this dephosphorylation/deactivation event to phosphotyrosyl protein phosphatase action, combined with the high affinities of this phosphatases for substrates and the high activities of the phosphatases in cells, suggests that the tyrosine kinase activity expressed by insulin-stimulated insulin receptors is likely to be stringently regulated.