An inositol phosphoglycan that is the polar head group of a glycosyl phosphatidylinositol has been considered as a putative mediator of insulin action. To gain insight into the functions of this hormone during development, the relationships between insulin, insulin receptors, glycosyl phosphatidylinositol, and inositol phosphoglycan were studied. Glycosyl phosphatidylinositol was isolated and characterized in fetal liver as early as day 15 of intrauterine life. In isolated hepatocytes from fetal and adult rats labeled with [3H]glucosamine, [3H]galactose, or [3H]myo-inositol, these molecules were incorporated into glycosyl phosphatidylinositol. In hepatocytes labeled with [3H]glucosamine and then allowed to react with [1-14C]IAI, the [3H]glycosyl phosphatidylinositol was purified as the 14C-labeled amidinated lipid. Glycosyl phosphatidylinositol molecules from fetal and adult cells were sensitive to hydrolysis by a phosphatidylinositol-specific phospholipase C from B. cereus. The product of this hydrolysis inhibits the activity of a cAMP-dependent protein kinase, whereas this effect was abolished by nitrous acid deamination. In isolated hepatocytes from adult animals, an inverse correlation between extracellular insulin and the number of insulin receptors and the cellular content of glycosyl phosphatidylinositol was observed. However, in fetal hepatocytes insulin failed to reduce the glycosyl-phosphatidylinositol content when labeled either with [1-14C]isethionyl acetimidate or [3H]glucosamine, whereas insulin-like growth factor I produced a significant hydrolysis of glycosyl phosphatidylinositol. Fetal and adult hepatocytes were incubated with insulin or inositol phosphoglycan after which glycogen phosphorylase activities were determined. Inositol phosphoglycan mimicked the action of insulin on both forms of the enzyme from adult hepatocytes, whereas in fetal cells insulin did not change, and purified inositol phosphoglycan reduced the activities of glycogen phosphorylase. These findings suggest a dissociation between insulin receptor occupancy and the expected hormonal effects in fetal hepatocytes. This could be related to alterations at a postreceptor level.