Recent data indicate that sustained elevations in plasma insulin suppress the mRNA for IRS-2, a component of the insulin signaling pathway in liver, and that this deficiency contributes to hepatic insulin resistance and inappropriate gluconeogenesis. Here, we use nuclear run-on assays to show that insulin inhibits transcription of the IRS-2 gene in the livers of intact rats. Insulin also inhibited transcription of a reporter gene driven by the human IRS-2 promoter that was transfected into freshly isolated rat hepatocytes. The human promoter contains a heptanucleotide sequence, TGTTTTG, that is identical to the insulin response element (IRE) identified previously in the promoters of insulin-repressed genes. Single base pair substitutions in this IRE decreased transcription of the IRS-2-driven reporter in the absence of insulin and abolished insulin-mediated repression. We conclude that insulin represses transcription of the IRS-2 gene by blocking the action of a positive factor that binds to the IRE. Sustained repression of IRS-2, as occurs in chronic hyperinsulinemia, contributes to hepatic insulin resistance and accelerates the development of the diabetic state.