The SOCS proteins are induced by several cytokines and are involved in negative feedback loops. Here we demonstrate that in 3T3-L1 adipocytes, insulin, a hormone whose receptor does not belong to the cytokine receptor family, induces SOCS-3 expression but not CIS or SOCS-2. Using transfection of COS-7 cells, we show that insulin induction of SOCS-3 is enhanced upon Stat5B expression. Moreover, Stat5B from insulin-stimulated cells binds directly to a Stat element present in the SOCS-3 promoter. Once induced, SOCS-3 inhibits insulin activation of Stat5B without modifying the insulin receptor tyrosine kinase activity. Two pieces of evidence suggest that this negative regulation likely results from competition between SOCS-3 and Stat5B binding to the same insulin receptor motif. First, using a yeast two-hybrid system, we show that SOCS-3 binds to the insulin receptor at phosphotyrosine 960, which is precisely where Stat5B binds. Second, using confocal microscopy, we show that insulin induces translocation of SOCS-3 from an intracellular compartment to the cell membrane, leading to colocalization of SOCS-3 with the insulin receptor. This colocalization is dependent upon phosphorylation of insulin receptor tyrosine 960. Indeed, in cells expressing an insulin receptor mutant in which tyrosine 960 has been mutated to phenylalanine, insulin does not modify the cellular localization of SOCS-3. We have thus revealed an insulin target gene of which the expression is potentiated upon Stat5B activation. By inhibiting insulin-stimulated Stat5B, SOCS-3 appears to function as a negative regulator of insulin signaling.