Insulin regulates the activity of both protein kinases and phosphatases. Little is known concerning the subcellular effects of insulin on phosphatase activity and how it is affected by insulin resistance. The purpose of this study was to determine insulin-stimulated subcellular changes in phosphatase activity and how they are affected by insulin resistance. We used an in vitro fatty acid (palmitate) induced insulin resistance model, differential centrifugation to fractionate rat adipocytes, and a malachite green phosphatase assay using peptide substrates to measure enzyme activity. Overall, insulin alone had no effect on adipocyte tyrosine phosphatase activity; however, subcellularly, insulin increased plasma membrane adipocyte tyrosine phosphatase activity 78 Ϯ 26% (n ϭ 4, P Ͻ 0.007), and decreased high-density microsome adipocyte tyrosine phosphatase activity 42 Ϯ 13% (n ϭ 4, P Ͻ 0.005). Although insulin resistance induced specific changes in basal tyrosine phosphatase activity, insulin-stimulated changes were not significantly altered by insulin resistance. Insulin-stimulated overall serine/threonine phosphatase activity by 16 Ϯ 5% (n ϭ 4, P Ͻ 0.005), which was blocked in insulin resistance. Subcellularly, insulin increased plasma membrane and crude nuclear fraction serine/threonine phosphatase activities by 59 Ϯ 19% (n ϭ 4, P Ͻ 0.005) and 21 Ϯ 7% (n ϭ 4, P Ͻ 0.007), respectively. This increase in plasma membrane fractions was inhibited 23 Ϯ 7% (n ϭ 4, P Ͻ 0.05) by palmitate. Furthermore, insulin increased cytosolic protein phosphatase-1 (PP-1) activity 160 Ϯ 50% (n ϭ 3, P Ͻ 0.015), and palmitate did not significantly reduce this activity. However, palmitate did reduce insulin-treated lowdensity microsome protein phosphatase-1 activity by 28 Ϯ 6% (n ϭ 3, P Ͻ 0.04). Insulin completely inhibited protein phosphatase-2A activity in the cytosol and increased crude nuclear fraction protein phosphatase-2A activity 70 Ϯ 29% (n ϭ 3, P Ͻ 0.038). Thus, the major effects of insulin on phosphatase activity in adipocytes are to increase plasma membrane tyrosine and serine/threonine phosphatase, crude nuclear fraction protein phosphatase-2A, and cytosolic protein phosphatase-1 activities, while inhibiting cytosolic protein phosphatase-2A. Insulin resistance was characterized by reduced insulin-stimulated serine/threonine phosphatase activity in the plasma membrane and low-density microsomes. Specific changes in phosphatase activity may be related to the development of insulin resistance.