Despite significant advances in the past few years on the chemistry and biology of insulin and its receptor, the molecular events that couple the insulin-receptor interaction to the regulation of cellular metabolism remain uncertain. Progress in this area has been complicated by the pleiotropic nature of insulin's actions. These most likely involve a complex network of pathways resulting in the coordination of mechanistically distinct cellular effects. Because the well-recognized mechanisms of signal transduction (i.e., cyclic nucleotides, ion channels) appear not to be central to insulin action, investigators have searched for a novel second messenger system. A low-molecular-weight substance has been identified that mimics certain actions of insulin on metabolic enzymes. This substance has an inositol glycan structure and is produced by the insulin-sensitive hydrolysis of a glycosyl-phosphatidylinositol in the plasma membrane. This hydrolysis reaction, which is catalyzed by a specific phospholipase C, also results in the production of a structurally distinct diacylglycerol that may selectively regulate one or more of the protein kinases C. The glycosyl-phosphatidyl-inositol precursor for the inositol glycan enzyme modulator is structurally analogous to the recently described glycosyl-phosphatidylinositol membrane protein anchor. Preliminary studies suggest that a subset of proteins anchored in this fashion might be released from cells by a similar insulin-sensitive, phospholipase-catalyzed reaction. Efforts are underway to determine the precise role of the metabolism of glycosyl-phosphatidylinositols in insulin action.