It is proposed that an intracellular cycle exists to limit or terminate the insulin signal. The cycle involves increased synthesis of sn-1,2-diacylglycerol (DAG) in response to insulin. The DAG activates protein kinase C (PKC) which phosphorylates glycogen synthase either directly or through other protein kinases to render it inactive. Protein kinase C may also inhibit the insulin receptor by phosphorylation of receptor serine residues. Insulin resistance could then arise as a consequence of a persistent increase in DAG levels. Such an increase could occur in three different ways. Chronic hyperinsulinaemia could increase DAG levels by de-novo synthesis from phosphatidic acid, by hydrolysis of phosphatidylcholine, or by hydrolysis of glycosyl-phosphatidylinositol; DAG is also formed by hydrolysis of phosphatidylinositol 4,5-biphosphate (PIP2). This reaction, known as the 'PI response,' may be the connection between hypertension and insulin resistance. A third mechanism for an increase in DAG involves neural abnormalities. Thus, muscle denervation in the rat is characterized both by a profound insulin resistance and a large increase in DAG. It is possible that a similar increase occurs in humans and may explain the association between denervation, inactivity, and insulin resistance.