We have studied how insulin-mediated internalization of insulin receptors and insulin activation of the insulin receptor kinase might be inter-related. Isolated rat adipocytes were exposed to 0, 6, or 500 ng/ml insulin for 40 min at 37 degrees C. Subsequently, plasma membrane, low-density microsomal membrane and high-density microsomal membrane subcellular fractions were prepared. Measurement of insulin binding to insulin receptors isolated from the membrane fractions revealed that exposure of cells to insulin resulted in a loss of binding activity (13% at 6 ng/ml, 27% at 500 ng/ml insulin) from the plasma membranes which was completely accounted for by the appearance of receptors in the low-density and high-density microsomal membrane fractions, indicating that insulin had induced translocation of insulin receptors from the surface to the cell interior. Measurement of kinase activity of the isolated receptors revealed that exposure of intact cells to 500 ng/ml insulin resulted in as much as a 35-fold increase in the intrinsic kinase activity of receptors from subcellular fractions. The kinase activity per receptor was equal in all fractions at 3-4 min but by 20 min the activity of the internalized receptors fell approximately 40% to a steady state; plasma membrane receptors, on the other hand, remained fully active over time. This indicates that newly internalized receptors retain their kinase activity but undergo subsequent deactivation. Following exposure of cells to 6 ng/ml insulin, the degree of activation of the insulin receptor kinase was lower in the plasma membrane fraction (24% of the insulin effect at 500 ng/ml) than in the low-density and high-density microsomal membrane fractions (54 and 77%, respectively, of the insulin effect at 500 ng/ml). These results suggest that receptors with an activated kinase are preferentially internalized. We conclude that exposure of adipocytes to insulin causes endocytosis of insulin receptors and activation of insulin receptor kinase, newly internalized receptors are fully active tyrosine kinases but are deactivated as they traverse the intracellular organelles represented by low-density and high-density microsomal membranes, and insulin receptor occupancy, possibly by stimulating phosphorylation and activating the insulin receptor kinase, is important for targeting insulin receptors for internalization.