Tyrosyl phosphorylation is implicated in the mechanism of insulin action. Mutation of the beta-subunit of the insulin receptor by substitution of tyrosyl residue 960 with phenylalanine had no effect on insulin-stimulated autophosphorylation or phosphotransferase activity of the purified receptor. However, unlike the normal receptor, this mutant was not biologically active in Chinese hamster ovary cells. Furthermore, insulin-stimulated tyrosyl phosphorylation of at least one endogenous substrate (pp185) was increased significantly in cells expressing the normal receptor but was barely detected in cells expressing the mutant. Therefore, beta-subunit autophosphorylation was not sufficient for the insulin response, and a region of the insulin receptor around Tyr-960 may facilitate phosphorylation of cellular substrates required for transmission of the insulin signal.