SOCS (suppressor of cytokine signaling) proteins are inhibitors of cytokine signaling involved in negative feedback loops. We have recently shown that insulin increases SOCS-3 mRNA expression in 3T3-L1 adipocytes. When expressed, SOCS-3 binds to phosphorylated Tyr(960) of the insulin receptor and prevents Stat 5B activation by insulin. Here we show that in COS-7 cells SOCS-3 decreases insulin-induced insulin receptor substrate 1 (IRS-1) tyrosine phosphorylation and its association with p85, a regulatory subunit of phosphatidylinositol-3 kinase. This mechanism points to a function of SOCS-3 in insulin resistance. Interestingly, SOCS-3 expression was found to be increased in the adipose tissue of obese mice, but not in the liver and muscle of these animals. Two polypeptides known to be elevated during obesity, insulin and tumor necrosis factor-alpha (TNF-alpha), induce SOCS-3 mRNA expression in mice. Insulin induces a transient expression of SOCS-3 in the liver, muscle, and the white adipose tissue (WAT). Strikingly, TNF-alpha induced a sustained SOCS-3 expression, essentially in the WAT. Moreover, transgenic ob/ob mice lacking both TNF receptors have a pronounced decrease in SOCS-3 expression in the WAT compared with ob/ob mice, providing genetic evidence for a function of this cytokine in obesity-induced SOCS-3 expression. As SOCS-3 appears as a TNF-alpha target gene that is elevated during obesity, and as SOCS-3 antagonizes insulin-induced IRS-1 tyrosine phosphorylation, we suggest that it is a player in the development of insulin resistance.