Trypsin exerts insulin-like effects in intact cells and on partially purified preparations of insulin receptors. To elucidate the mechanism of these insulinomimetic effects, we compared the structures of insulin- and trypsin-activated receptor species with their functions, including insulin binding, autophosphorylation, and tyrosine kinase activity. In vitro treatment of wheat germ agglutinin-purified receptor preparations with trypsin resulted in proteolysis of both alpha- and beta-subunits. The activated form of the receptor had an apparent molecular mass of 110 kDa under nonreducing conditions, compared to the 400-kDa intact receptor, and was separated following reduction into an 85-kDa beta-subunit related fragment and a 25-kDa alpha-subunit related fragment. Treatment of whole cells with trypsin prior to isolation of the insulin receptor resulted in proteolytic modification of the alpha-subunit only. In this case, the total molecular mass of the activated species was 116 kDa, comprised of an intact 92-kDa beta-subunit and again a 25-kDa alpha-subunit related fragment. Values of Km for peptide substrate phosphorylation and Ki for inhibition of receptor autophosphorylation, and sites of autophosphorylation within the beta-subunits were similar for receptors activated either by insulin or trypsin. Insulin had no additional effect on the rate of autophosphorylation of the truncated receptor, and no binding of insulin by the truncated receptor was detected either by direct assay or cross-linking with bifunctional reagents. Based on the deduced amino acid sequence of the insulin receptor and the structural studies presented here we concluded that this activated form of the receptor resulted from tryptic cleavage at the dibasic site Arg576-Arg577. This was accompanied by loss of the insulin binding site and separation of alpha-beta heterodimers. As truncation of the alpha-subunit results in beta-subunit activation, it appears that the beta-subunit is a constitutively activated kinase and that the function of the alpha-subunit in the intact receptor is to inhibit the beta-subunit.