Mutations in the insulin receptor gene can lead to in vivo and in vitro insulin resistance and can be the cause of diabetes mellitus in selected patients. We have studied a 22-year-old diabetic woman with Type A insulin resistance and acanthosis nigricans. Insulin binding to the patient's erythrocytes, monocytes, adipocytes, fibroblasts, and transformed lymphocytes was decreased. Receptor autophosphorylation and tyrosine kinase activity toward an exogenous substrate were reduced in partially purified insulin receptors from the proband's transformed lymphocytes. Determination of the nucleotide sequence of the patient's insulin receptor cDNA revealed that the subject was a compound heterozygote who inherited two different mutant insulin receptor gene alleles. The paternal allele contains a missense mutation encoding the substitution of glutamine for arginine at position 981 in the tyrosine kinase domain of the receptor. The maternal allele contains a nonsense mutation causing premature termination after amino acid 988 in the beta-subunit, thereby deleting most of the kinase domain. The mRNA encoded by the allele with the premature stop codon is likely to be unstable, since mRNA transcripts from this allele were decreased markedly compared with the other allele. The mother, who is heterozygous for the nonsense mutation, exhibited only mild insulin resistance, whereas the proband was severely insulin-resistant; this indicates that the missense mutation is biologically significant. In summary, (1) we have identified a patient and her family with a genetic form of insulin resistance and diabetes due to a defect at the level of the insulin receptor; (2) the proband is a compound heterozygote displaying a missense mutation (position 981) in one allele and a nonsense mutation (position 988) in the other insulin receptor gene allele; (3) the missense mutation is in the kinase domain and encodes a receptor with impaired in vitro kinase activity; and (4) based on the in vitro and in vivo phenotype, the kinase domain mutation at position 981 is biologically significant leading to insulin resistance.