Multiple signalling pathways are involved in the mechanism by which insulin stimulates hepatic glycogen synthesis. In this study we used selective inhibitors of glycogen synthase kinase-3 (GSK-3) and an allosteric inhibitor of phosphorylase (CP-91149) that causes dephosphorylation of phosphorylase a, to determine the relative contributions of inactivation of GSK-3 and dephosphorylation of phosphorylase a as alternative pathways in the stimulation of glycogen synthesis by insulin in hepatocytes. GSK-3 inhibitors (SB-216763 and Li+) caused a greater activation of glycogen synthase than insulin (90% vs. 40%) but a smaller stimulation of glycogen synthesis (30% vs. 150%). The contribution of GSK-3 inactivation to insulin stimulation of glycogen synthesis was estimated to be less than 20%. Dephosphorylation of phosphorylase a with CP-91149 caused activation of glycogen synthase and translocation of the protein from a soluble to a particulate fraction and mimicked the stimulation of glycogen synthesis by insulin. The stimulation of glycogen synthesis by phosphorylase inactivation cannot be explained by either inhibition of glycogen degradation or activation of glycogen synthase alone and suggests an additional role for translocation of synthase. Titrations with the phosphorylase inactivator showed that stimulation of glycogen synthesis by insulin can be largely accounted for by inactivation of phosphorylase over a wide range of activities of phosphorylase a. We conclude that a signalling pathway involving dephosphorylation of phosphorylase a leading to both activation and translocation of glycogen synthase is a critical component of the mechanism by which insulin stimulates hepatic glycogen synthesis. Selective inactivation of phosphorylase can mimic insulin stimulation of hepatic glycogen synthesis.