The function of insulin receptor substrate-1 (IRS-1), a key molecule of insulin signaling, is modulated by phosphorylation at multiple serine/threonine residues. Phorbolester stimulation of cells induces phosphorylation of two inhibitory serine residues in IRS-1, i.e. Ser307 and Ser318, suggesting that both sites may be targets of protein kinase C (PKC) isoforms. However, in an in vitro system using a broad spectrum of PKC isoforms (a, ß1, ß2, d, e, , µ), we detected only Ser318, but not Ser307, phosphorylation suggesting that phorbolester-induced phosphorylation of this site in intact cells requires additional signalling elements and serine kinases which link PKC activation to Ser307 phosphorylation. As we have recently observed that the tyrosine phosphatase Shp2, a negative regulator of insulin signalling, is a substrate of PKC, we studied the role of Shp2 in this context. We found that phorbolester-induced Ser307 phosphorylation is markedly reduced in Shp2-deficient mouse embryonic fibroblasts (MEF Shp2-/-) while Ser318 phosphorylation is unaltered. The Ser307 phosphorylation was rescued by transfection of MEF Shp2-/- cells with wild-type Shp2 or with a phosphatase-inactive Shp2 mutant, respectively. In this cell model, TNF-a-induced Ser307 phosphorylation as well depended on the presence of Shp2. Furthermore, Shp2-dependent phorbolester effects on Ser307 were blocked by wortmannin, rapamycin, and the c-jun N-terminal kinase (JNK) inhibitor SP600125. This suggests an involvement of the phosphatidyl-inositol 3-kinase/mammalian target of rapamycin cascade and of JNK in this signalling pathway resulting in IRS-1 Ser307 phosphorylation. Since the activation of these kinases does not depend on Shp2, it is concluded that Shp2’s function is to direct these activated kinases to IRS-1.