Insulin signal transduction involves the multisite docking protein insulin receptor substrate-1 (IRS-1) and a number of Src homology-2 (SH2) domain factors, including p85/p110 phosphatidylinositol 3-kinase, p110 GTPase-activating protein, and the phosphotyrosine-specific phosphatase PTP1D. In transfected baby hamster kidney cells, Rat1 fibroblasts, and normal IM9 lymphoblasts, PTP1D directly binds activated insulin receptor. This interaction is mediated by catalytic domain-proximal SH2 determinants of the phosphatase and phosphotyrosine 1146 of the activated insulin receptor. While the receptor and the phosphatase do not serve as substrates for each other, their interaction promotes IRS-1 binding to the receptor, indicating that PTP1D functions as an adapter for insulin receptor and IRS-1. The formation of a multiprotein signaling complex involving the insulin receptor, PTP1D, and IRS-1 enhances cellular glucose uptake, a critical process in the physiological action of insulin.