We have studied the reversibility of insulin receptor phosphorylation to establish the relation between this autophosphorylation reaction and the initiation of insulin action and between dephosphorylation and the termination of insulin effects in cells. In cultured Fao hepatoma cells labeled with 32PO4(3-), insulin increased 5-fold the phosphorylation of the beta-subunit of the insulin receptor at serine, threonine, and tyrosine residues. Addition of anti-insulin antiserum to cells incubated with insulin caused dissociation of insulin from the receptor and concurrent dephosphorylation of the beta-subunit. 32PO4(3-) associated with the insulin-stimulated receptor could be decreased by the addition of sodium phosphate to the medium but with a slower time course. Insulin stimulated phosphorylation of insulin receptor purified partially on immobilized wheat germ agglutinin. This reaction utilized [gamma-32P] ATP and occurred exclusively on tyrosine residues. Addition of unlabeled ATP caused a decrease in the amount of PO4(3-) associated with the receptor. Insulin-stimulated phosphorylation was also observed if the receptors were further purified by immunoprecipitation with anti-insulin receptor antibody prior to the phosphorylation reaction; however, addition of unlabeled ATP to this system did not chase the labeled 32PO4(3-) from the beta-subunit. These data are consistent with the notion that phosphorylation and dephosphorylation of the insulin receptor parallel the onset and termination of insulin action. Phosphatase activity involved in the dephosphorylation of the insulin receptor appears to be a glycoprotein because it was retained after partial purification of the receptor on wheat germ agglutinin-agarose; however, this phosphatase activity is distinct from the insulin receptor because it was not retained after immunoprecipitation of the receptor with anti-insulin receptor antibodies.