Limited proteolysis of serum insulin-like growth factor (IGF) binding protein (IGFBP)-3 has been described in various conditions and may increase the bioavailability of IGFs. The physiological regulators of serum IGFBP-3 protease activity are unknown. To characterize the relationship between insulin and IGFBP-3 protease activity, we have examined serum IGFBP-3 proteolysis in children with untreated insulin-dependent diabetes mellitus (IDDM) and have followed the effect of insulin therapy on serum IGFBP-3 proteolysis at 1 day, 1 week, and 1 month after the initiation of insulin therapy. Ligand blot analysis of sera from untreated children with IDDM showed that intact IGFBP-3 was 50 +/- 9% of the age-matched control pool. After the initiation of insulin treatment, IGFBP-3 did not change significantly at 1 day after treatment but increased dramatically at 1 week (90 +/- 13%) and 1 month after treatment (102 +/- 13%). In contrast, when measured by immunoradiometric assay (which detects both intact and fragments of IGFBP-3), IGFBP-3 levels were 70% of the control pool before insulin therapy and did not increase significantly until 1 month after treatment. Immunoblot analysis demonstrated that intact IGFBP-3 doublet was diminished to 41 +/- 7% of controls, whereas the major IGFBP-3 fragment (30 kDa) was increased in IDDM sera before insulin therapy. After insulin, intact IGFBP-3 increased and the 30-kDa fragment decreased to values comparable to those observed in controls. In vivo IGFBP-3 proteolysis, which implies preassay exposure of serum IGFBP-3 to proteases, was estimated by immunoblot analysis. IGFBP-3 proteolysis was increased before insulin therapy (160 +/- 9%) and decreased to 81 +/- 9% at 1 week and to 71 +/- 11% at 1 month after insulin treatment. Residual serum IGFBP-3 protease activity was estimated by a 125I-IGFBP-3 degradation assay. Serum IGFBP-3 protease activity increased significantly in untreated diabetics, compared with activity in controls (128 +/- 5% vs. 99 +/- 11%). During insulin therapy, serum IGFBP-3 protease activity decreased gradually to 91 +/- 5% of control values at 1 month. Molecular sizes of the IGFBP-3 proteolytic fragments (30 kDa, 24 kDa, and 19 kDa) and inhibition profile of IGFBP-3 protease were similar in IDDM and pregnancy sera, indicating that similar proteases (cation-dependent serine proteases) were active in both conditions. These results suggest an important role of insulin in the regulation of IGFBP-3 protease activity. Increased IGFBP-3 proteolysis in the sera of children with IDDM may serve to counteract the catabolic state induced by insulin deficiency.