The positive regulatory role of PSM/SH2-B downstream of various mitogenic receptor tyrosine kinases or gene disruption experiments in mice support a role of PSM in the regulation of insulin action. Here, four alternative PSM splice variants and individual functional domains were compared for their role in the regulation of specific metabolic insulin responses. We found that individual PSM variants in 3T3-L1 adipocytes potentiated insulin-mediated glucose and amino acid transport, glycogenesis, lipogenesis, and key components in the metabolic insulin response including p70 S6 kinase, glycogen synthase, glycogen synthase kinase 3 (GSK3), Akt, Cbl, and IRS-1. Highest activity was consistently observed for PSM alpha, followed by beta, delta, and gamma with decreasing activity. In contrast, dominant-negative peptide mimetics of the PSM Pro-rich, pleckstrin homology (PH), or src homology 2 (SH2) domains inhibited any tested insulin response. Potentiation of the insulin response originated at the insulin receptor (IR) kinase level by PSM variant-specific regulation of the Km (ATP) whereas the Vmax remained unaffected. IR catalytic activation was inhibited by peptide mimetics of the PSM SH2 or dimerization domain (DD). Either peptide should disrupt the complex of a PSM dimer linked to IR via SH2 domains as proposed for PSM activation of tyrosine kinase JAK2. Either peptide abolished downstream insulin responses indistinguishable from PSM siRNA knockdown. Our results implicate an essential role of the PSM variants in the activation of the IR kinase and the resulting metabolic insulin response. PSM variants act as internal IR ligands that in addition to potentiating the insulin response stimulate IR catalytic activation even in the absence of insulin.