Insulin receptor substrate-1 (IRS-1) is the major cytoplasmic substrate of the insulin and insulin-like growth factor (IGF)-1 receptors. Transgenic mice lacking IRS-1 are resistant to insulin and IGF-1, but exhibit significant residual insulin action which corresponds to the presence of an alternative high molecular weight substrate in liver and muscle. Recently, Sun et al. (Sun, X.-J., Wang, L.-M., Zhang, Y., Yenush, L. P., Myers, M. G., Jr., Glasheen, E., Lane, W.S., Pierce, J. H., and White, M. F. (1995) Nature 377, 173-177) purified and cloned 4PS, the major substrate of the IL-4 receptor-associated tyrosine kinase in myeloid cells, which has significant structural similarity to IRS-1. To determine if 4PS is the alternative substrate of the insulin receptor in IRS-1-deficient mice, we performed immunoprecipitation, immunoblotting, and phosphatidylinositol (PI) 3-kinase assays using specific antibodies to 4PS. Following insulin stimulation, 4PS is rapidly phosphorylated in liver and muscle, binds to the p85 subunit of PI 3-kinase, and activates the enzyme. Insulin stimulation also results in the association of 4PS with Grb 2 in both liver and muscle. In IRS-1-deficient mice, both the phosphorylation of 4PS and associated PI 3-kinase activity are enhanced, without an increase in protein expression. Immunodepletion of 4PS from liver and muscle homogenates removes most of the phosphotyrosine-associated PI 3-kinase activity in IRS-1-deficient mice. Thus, 4PS is the primary alternative substrate, i.e. IRS-2, which plays a major role in physiologic insulin signal transduction via both PI 3-kinase activation and Grb 2/Sos association. In IRS-1-deficient mice, 4PS/IRS-2 provides signal transduction to these two major pathways of insulin signaling.