The stimulation of glycogen-targeted protein phosphatase 1 (PP1), glycogen synthase, and glycogen synthesis by insulin was examined during the differentiation of 3T3-L1 fibroblasts into adipocytes. Insulin treatment barely changed the low levels of glycogen synthesis measured in fibroblasts. Following differentiation into adipocytes, insulin increased glycogen synthesis up to 40-fold. After further culturing of the adipocytes for a week, insulin stimulated glycogen accumulation 700-fold, Differentiation of 3T3-L1 cells also resulted in the increased expression of glycogen synthase and in increases in both total glycogen synthase activity and -fold stimulation by insulin, While the levels of PP1 protein were unchanged by differentiation, PP1 specific activity decreased over 60%, although sensitivity to insulin treatment was augmented. Concurrently, levels of the PP1 inhibitor protein DARPP-32 were dramatically induced upon 3T3-L1 adipogenesis. DARPP-32 in both 3T3-L1 and primary rat adipocytes was exclusively localized to the particulate fractions, including the glycogen enriched pellet. PP1 activity from 3T3-L1 adipocytes exhibited a kinetic lag in vitro, which was not present in fibroblast extracts, Insulin pretreatment of the adipocyte cells overcame the in vitro lag in PP1 activity, resulting in up to 5-fold stimulation of PP1 activity being measured at early assay time points, These results suggest that in 3T3-L1 adipocytes, DARPP-32 may maintain glycogen-targeted PP1 activity in a low basal state, priming the phosphatase for stimulation by insulin.