The mechanism through which insulin binding to the extracellular domain of the insulin receptor activates the intrinsic tyrosine kinase in the intracellular domain of the protein is unknown. For the c-neu/erbB-2 (c-erbB-2) protooncogene, a single point mutation within the transmembrane (TM) domain converting Val-664 to Glu (erbB-2V-->E) results in elevated levels of tyrosine kinase activity and cellular transformation. We report the construction of a chimeric insulin receptor in which the TM domain of the receptor has been substituted with that encoded by erbB-2V-->E. When expressed in Chinese hamster ovary cells this chimeric receptor displays maximal levels of autophosphorylation and kinase activity in the absence of insulin. This activity results in an increase in the level of insulin-receptor substrate 1 phosphorylation but a down-regulation in insulin-receptor substrate 1 protein and desensitization to insulin stimulation of glycogen synthesis. By contrast, basal levels of DNA synthesis are elevated to levels approximately 60% of those observed in serum-stimulated cells. Over-expression of chimeric insulin receptors containing the c-erbB-2 TM domain or a single point mutation in the insulin receptor TM domain of Val-938-->Asp, on the other hand, shows none of these alterations. Thus, the TM domain encoded by erbB-2V-->E contains structural features that can confer ligand-independent activation in a heterologous protein. Constitutive activation of the insulin receptor results in a relative increase in basal levels of DNA synthesis, but an apparent resistance to the metabolic effects of insulin.