Obesity and stress inhibit insulin action by activating protein kinases that enhance serine phosphorylation of IRS1 and have been thus associated to insulin resistance and the development of type II diabetes. The protein kinase C (PKC) is activated by free-fatty acids, and its activity is higher in muscle from obese diabetic patients. However, a molecular link between PKC and insulin resistance has not been defined yet. Here we show that PKC phosphorylates IRS1 at serine 1101 blocking IRS1 tyrosine phosphorylation and downstream activation of the Akt pathway. Mutation of Ser(1101) to alanine makes IRS1 insensitive to the effect of PKC and restores insulin signaling in culture cells. These results provide a novel mechanism linking the activation of PKC to the inhibition of insulin signaling.