To study the role of membrane lipids in signal transduction by the insulin receptor, we have studied the effect of phospholipase C (Clostridium perfringens) and a phosphatidylinositol-specific phospholipase (Staphylococcus aureus) on insulin binding, a function of the alpha-subunit, and tyrosine kinase activity, a function of the beta-subunit in IM-9 lymphocytes and NIH 3T3 fibroblasts transfected with the human insulin receptor. Treatment of the cells with phospholipase C at concentrations up to 3.4 U/ml did not affect specific insulin binding, but reduced insulin-stimulated receptor phosphorylation by 50%. This effect of phospholipase C was observed within 10 min of treatment and occurred with no change in the basal level of phosphorylation. Pre-treatment of cells with insulin for 5 min prior to enzyme addition prevented any change in kinase activity. Insulin-stimulated phosphorylation of pp 185, the presumed endogenous substrate for the insulin receptor kinase, was also reduced following phospholipase C treatment, with an almost complete loss of insulin stimulation after exposure of cells to enzyme at concentrations as low as 0.6 U/ml. In contrast to these effects of phospholipase C on intact cells, receptor autophosphorylation was not affected in insulin receptors purified on wheat germ agglutinin-agarose from phospholipase C treated cells. Likewise, the phospholipase C effect was reduced by the addition of phosphatidylcholine, but not by the addition of the protease inhibitors, aprotinin and phenylmethylsulfonyl fluoride, to the incubation indicating its dependence on phospholipid hydrolysis. Treatment of cells with the phosphatidylinositol-specific phospholipase C did not affect any of the parameters studied.(ABSTRACT TRUNCATED AT 250 WORDS)