Shc and insulin receptor substrate 1 (IRS-1) are cytoplasmic substrates of tyrosine kinase receptors that engage, localize, and activate downstream SH2 enzymes. Each contains a phosphotyrosine-binding (PTB) domain that is structurally unrelated to SH2 domains. We have designed high-affinity, cellular inhibitors of the Shc PTB domain by incorporating nonnatural, phosphatase-resistant amino acids into short peptides. None of the inhibitors bind the IRS-1 PTB domain, consistent with distinct specificities for domains. The best inhibitor of the Shc domain was introduced by electroporation into Rat1 fibroblasts that express human insulin receptors. Insulin-stimulated phosphorylation of Shc was inhibited, with no effect on IRS-1, and downstream effects on mitogen-activated protein kinase and DNA synthesis were both inhibited. The PTB domain inhibitor had less influence on epidermal growth factor-induced effects and essentially no impact on serum- or phorbol ester-induced effects. The inhibitor did not affect insulin internalization and its degradation. We conclude that the PTB domain of Shc is critical for its phosphorylation by the insulin receptor, that Shc is an important mediator of insulin's mitogenic effects, and that Shc is not central to insulin receptor cycling in these cells. PTB domains can be inhibited selectively in cells and represent potential targets for drug discovery.