The degradation of insulin-125I by adipose tissue was determined by the appearance of 125I in the trichloroacetic acid (TCA) soluble tissue fraction. A maximum of 30% of the 125I appears as TCA-soluble material following incubation with adipose tissue homogenates. Destruction of immunoreactive insulin and insulin-like activities is, however, complete. The appearance of TCA-soluble 125I is due to proteolysis rather than to deiodination since it can be decreased by the addition of unlabelled insulin to the incubation mixture. No increase in free iodine could be detected. The degradation of insulin by intact adipose tissue is greater than by free adipocytes. Tissue homogenization greatly increases the rate of insulin degradation. Most of the insulin-degrading activity is found in the "fat-free" fraction of the tissue homogenate, but this activity is rapidly lost during incubation at 37 °C. In contrast the lesser activity in the fat layer remains stable at 37°. N-Ethylmaleimide, which inhibits breakdown of the hormone by homogenates, increases the degradation of insulin by adipocytes. These results indicate that caution must be employed in interpreting binding and destruction of iodinated insulin and raise the possibility that insulin may penetrate the cell prior to its destruction.