The cellular fate of insulin receptors in isolated rat adipocytes was studied by using a biologically active photosensitive insulin derivative, B2(2-nitro-4-azidophenylacetyl)-des-PheB1-insulin (NAPA-DP-insulin), to photoaffinity label the insulin receptors. Insulin receptors specifically labeled with 125I-labeled NAPA-DP-insulin were identified by NaDodSO4/polyacrylamide gel electrophoresis and autoradiography. Under nonreducing conditions, specific bands of Mr 330,000, 295,000, and 260,000 were identified; under disulfide reducing conditions, these were converted into Mr 125,000 and 90,000 subunits. When cells labeled at 16 degrees C were immediately trypsinized, all of the receptor bands were degraded into lower molecular weight fragments, indicating that the labeled receptors were all on the cell surface. However, when the labeled cells were incubated at 37 degrees C for 1 hr prior to trypsin exposure, approximately equal to 30% of the receptors were found to be trypsin insensitive, indicating that this fraction was translocated intracellularly. Processing of the insulin receptors appeared to occur; incubation at 37 degrees C (but not at 16 degrees C) resulted in generation of a Mr 115,000 component from the Mr 125,000 subunit as well as in the disappearance of the Mr 330,000 and 295,000 species. Inclusion of chloroquine during photoaffinity labeling at 16 degrees C and during the subsequent incubation at 37 degrees C showed that this agent (i) increased the trypsin-insensitive (intracellular) receptor pool, (ii) blocked conversion of the Mr 125,000 subunit into the Mr 115,000 component, and (iii) prevented the disappearance of the Mr 330,000 and 295,000 species. These studies show that insulin-receptor complexes are internalized and processed intracellularly at a chloroquine-sensitive site(s).