We have previously reported in Chinese hamster ovary (CHO) cells expressing sst2 that activation of the sst2 somatostatin receptor inhibits insulin-induced cell proliferation by a mechanism involving stimulation of a tyrosine phosphatase activity, Here we show that the tyrosine phosphatase SHP-1 was associated with the insulin receptor (HC) at the basal level, Activation of IR by insulin resulted in a rapid and transient increase of tyrosine phosphorylation of IR, its substrates IRS-1 and Shc, and also of SHP-1, This was then followed by a rapid dephosphorylation of these molecules, which was related to the insulin-induced increase of SHP-1 association to IR and of SHP-1 activity, On the other hand, addition to insulin of the somatostatin analogue, RC160, resulted in a higher and faster increase of SHP-1 association to IR directly correlated with an inhibition of phosphorylation of IR and its substrates, IRS-1 and She. RC160 also induced a higher and more sustained increase in SHP-1 activity, Furthermore, RC160 completely suppressed the effect of insulin on SHP-1 phosphorylation. Finally, in CHO cells coexpressing sst2 and a catalytically inactive mutant SHP-1, insulin as well as RC160 could no longer stimulate SHP-1 activity, Over-expression of the SHP-1 mutant prevented the insulin-induced signaling to be terminated by dephosphorylation of IR, suppressed the inhibitory effect of RC160 on insulin-induced IR phosphorylation, and abolished the cell proliferation modulation by insulin and RC160, Our results suggest that SHP-1 plays a role in negatively modulating insulin signaling by association with IR. Furthermore, somatostatin inhibits the insulin-induced mitogenic signal by accelerating and amplifying the effect of SHP-1 on the termination of the insulin signaling pathway.