Insulin's interaction with its receptor initiates a multitude of cellular effects on metabolism, growth, and differentiation. We recently described an insulin-mediated inhibition of nuclear protein phosphatase 2A (PP-2A), which is associated with an increase in phosphorylation of the transcription factor cAMP response element-binding protein. To clarify the role of nuclear PP-2A inhibition in the insulin signaling cascade, we examined the regulation of this phosphatase activity by insulin in Rat-1 fibroblasts overexpressing normal (HIRc) or mutant human insulin receptors (delta CT cells, deletion of a 43-amino acid C-terminal domain). The delta CT cells represent an excellent model of impaired metabolic and intact mitogenic action of insulin. Insulin inhibited nuclear PP-2A activity and enhanced cAMP response element-binding protein phosphorylation in HIRc cells, but not in delta CT cells. The delta CT cells exhibited normal ras activation and blunted mitogen-activating protein kinase phosphorylation and activation in response to insulin (16-fold in HIRc cells vs. 3-fold in delta CT cells), indicating that the mitogen-activating protein kinase pathway is important for the regulation of nuclear PP-2A activity by insulin. We conclude that insulin inhibits nuclear PP-2A activity, and that the carboxy-terminal domain of the insulin receptor is important for this effect.