We have identified a homozygous mutation near the carboxyl terminus of the insulin receptor (IR) alpha subunit from a leprechaun patient, changing Asp707 into Ala. Fibroblasts from this patient had no high affinity insulin binding sites. To examine the effect of the mutation on IR properties, the mutant IR was stably expressed in Chinese hamster ovary cells. Western blot analysis and metabolic labeling showed a normal processing of the mutant receptor to alpha and beta subunits. No increase in high affinity insulin binding sites was observed on Chinese hamster ovary cells expressing the mutant receptor, and also, affinity cross-linking of 125I-labeled insulin by disuccinimidyl suberate to these cells failed to label the mutant alpha subunit. Biotinylation of cell surface proteins by biotin succinimidyl ester resulted in efficient biotinylation of the mutant IR alpha and beta subunits, showing its presence on the cell surface. On solubilization of the mutant insulin receptor in Triton X-100-containing buffers, 125I-insulin was efficiently cross-linked to the receptor alpha subunit by disuccinimidyl suberate. These studies demonstrate that Ala707 IR is normally processed and transported to the cell surface and that the mutation distorts the insulin binding site. Detergent restores this site. This is an example of a naturally occurring mutation in the insulin receptor that affects insulin binding without affecting receptor transport and processing. This mutation points to a major contribution of the alpha subunit carboxyl terminus to insulin binding.