Insulin degradation by isolated rat adipocytes was evaluated using gel filtration and a new technique of differential precipitation to fractionate the sample by molecular size using polyethylene glycol and trichloracetic acid. At 37 degrees C, 125I-insulin bound to adipocytes was rapidly degraded into small fragments or iodotyrosine. 125I-insulin in the medium was also degraded into iodotyrosine, as well as fragments intermediate in molecular weight between insulin and iodotyrosine. Lowering the temperature to 15 degrees C or adding bacitracin to the medium inhibited degradation in the medium but had little effect on cell-associated degradation. Methylamine, on the other hand, inhibited cell-associated degradation, but had little effect on the insulin degradation in the medium. Addition of methylamine or bacitracin or lowering of the temperature increased the amount of 125I-insulin bound to the cell and prolonged the steady-state of binding. Bacitracin also produced a slight shift to the left in the dose response curve for insulin-stimulated glucose oxidation. Methylamine increased basal glucose oxidation, but had no effect on insulin sensitivity as measured in the glucose oxidation bioassay. These data suggest that isolated adipocytes in vitro exhibit at least two distinct pathways of insulin degradation, a cell-associated pathway which can be inhibited by methylamine and a medium pathway which can be inhibited by bacitracin. Neither pathway, however, appears to be closely linked to insulin's ability to stimulate glucose metabolism in these cells.