We have used photoreactive insulin analogues to investigate as related processes, early structural modification of the receptor-bound insulin molecule and internalisation of the insulin-receptor complex. In isolated rat hepatocytes an initial modification of bound insulin leads to the generation of a molecular species unchanged in molecular weight but with reduced receptor and antibody binding affinities and altered electrophoretic mobility. Using photoreactive insulin analogues and density gradient cell fractionation the insulin receptor complex has been shown to undergo internalisation from the plasma membrane to a low density vesicular fraction, the endosome. No labelled material was found in lysosomal fractions after up to 10 min incubation at 37 degrees C. The degree of labelling of the endosome fraction depended on the position of the photoreactive group within the insulin molecule. The data suggest that before or during endocytosis, a small peptide is proteolytically cleaved from the C terminus of the insulin B chain.