Insulin degradation within isolated rat liver endosomes was studied in vitro with the aid of three 125I-insulin isomers specifically labelled at tyrosine (A14, B16 and B26). Chloroquine and 1,10-phenanthroline were used to minimize insulin proteolysis during endosome preparation, whereas the manipulation of endosomal processing of insulin in vitro by Co2+ ions (to activate) and 1,10-phenanthroline (to inhibit) permitted the study of degradation intermediates and their time-dependent production. Structural and kinetic analysis of intermediates isolated from both intra- and extra-endosomal compartments allowed the determination of major cleavage sites and the probable sequence of proteolytic events. It was found that 125I-tyrosine is the ultimate labelled degradation product of all iodo-insulin isomers, suggesting that endosomal proteases are able to degrade insulin to the level of its constituent amino acids. 125I-tyrosine was also the only radiolabelled product able to cross the endosomal membrane. Intra-endosomal insulin degradation proceeds via two inter-related cleavage routes after metalloendoprotease cleavage of the B-chain. One pathway results from an initial cleavage in the centre region of the B-chain (B7-19), probably at B14-15, whereas the major route results from a cleavage at B24-25. B24-25 cleavage removes the B-chain C-terminal hexapeptide (B25-30), which is subsequently cleaved by an aminopeptidase activity to produce first the pentapeptide B26-30 and then 125I-tyrosine. The isolation of intact radiolabelled A-chain from the degradation of 125I-[A14]-insulin suggests that further degradation of proteolytic intermediates containing cleaved B-chain proceeds via interchain disulphide reduction. The A-chain is then processed by several cleavages, one of which occurs at A13-14.