Based on the distribution of 125I-insulin between the cell surface and the cell interior, it was found that insulin rapidly binds (t 1/2 = 0.4 min) to surface receptors at 37 degrees C, and after an initial lag period of about 1 min, accumulates intracellularly until steady state is reached (t 1/2 = 3.5 min). At this time about 40% of the total cell-associated 125I-insulin resides in the cell interior reflecting a dynamic equilibrium between the rate of insulin endocytosis and the rate at which internalized insulin is processed and extruded from cells. Since this percentage decreased to 15% at 16 degrees C, it appears that internalization is more temperative-sensitive than the intracellular processing of insulin. When 125I-insulin was preloaded into the cell interior, it was found that internalized insulin was rapidly released to the medium at 37 degrees C (t 1/2 = 6.5 min) and consisted of both degraded products and intact insulin (as assessed by trichloroacetic acid precipitability and column chromatography). Since 75% of internalized insulin was ultimately degraded, and 25% was released intact, this indicates that degradation is the predominant pathway. To determine when incoming insulin enters a degradative compartment, cells were continually exposed to 125I-insulin and the composition of insulin in the cell interior over time was assessed. After 2 min all endocytosed insulin was intact, between 2-3 min degradation products began accumulating intracellularly, and by 15 min equilibrium was reached with 20% of internalized insulin consisting of degraded products. Degraded insulin was then released from the cell interior within 4-5 min after endocytotic uptake, since this was the earliest time chloroquine was found to inhibit the release of degradation products. Moreover, the final release of degraded insulin was not inhibitable by the energy depleter dinitrophenol. Thus, within the degradative pathway, insulin enters lysosomes by 2.5-3 min and is released to the medium by simple diffusion after an additional 1.5-2 min.