CEACAM1, a tumor suppressor (previously known as pp120), is a plasma membrane protein that undergoes phosphorylation on Tyr(488) in its cytoplasmic tail by the insulin receptor tyrosine kinase. Co-expression of CEACAM1 with insulin receptors decreased cell growth in response to insulin. Co-immunoprecipitation experiments in intact NIH 3T3 cells and glutathione S-transferase pull-down assays revealed that phosphorylated Tyr488 in CEACAM1 binds to the SH2 domain of She, another substrate of the insulin receptor. Overexpressing She SH2 domain relieved endogenous She from binding to CEACAM1 and restored MAP kinase activity, growth of cells in response to insulin, and their colonization in soft agar. Thus, by binding to She, CEACAM1 sequesters this major coupler of Grb2 to the insulin receptor and down-regulates the Ras/MAP kinase mitogenesis pathway. Additionally, CEACAM1 binding to She enhances its ability to compete with IRS-1 for phosphorylation by the insulin receptor. This leads to a decrease in IRS-1 binding to phosphoinositide W-kinase and to the down-regulation of the phosphoinositide 3'-kinase/Akt pathway that mediates cell proliferation and survival. Thus, binding to She appears to constitute a major mechanism for the down-regulatory effect of CEACAM1 on cell proliferation.