The dephosphorylation of glycogen synthase is a key step in the stimulation of glycogen synthesis by insulin. To further investigate the hormonal regulation of glycogen synthase activity, enzymatic localization in 3T3-L1 adipocytes was determined by immunocytochemistry and confocal microscopy. In basal cells, glycogen synthase and the protein phosphatase-1 glycogen-targeting subunit PTG were diffusely distributed throughout the cell. Insulin treatment had no effect on PTG distribution but resulted in a reorganization of glycogen synthase into punctate clusters. Glycogen synthase aggregation was restricted to discrete cellular sites, presumably where glycogen synthesis occurred. Omission of extracellular glucose, or substitution with 2-deoxy-glucose, blocked the insulin-induced redistribution of glycogen synthase. Addition of the glycogenolytic agent forskolin after insulin stimulation disrupted the clusters of glycogen synthase protein, restoring the immunostaining pattern to the basal state. Conversely, adenoviral-mediated overexpression of PTG resulted in the insulin-independent dephosphorylation of glycogen synthase, and a redistribution of the enzyme from the cytosolic to glycogen containing fractions. The effects of PTG on glycogen synthase activity were mediated by multisite dephosphorylation, which was enhanced by insulin and 2-deoxy-glucose, and required a functional glycogen synthase-binding domain on PTG. However, PTG overexpression did not induce distinct glycogen synthase clustering in fixed cells, presumably because cellular glycogen levels were increased more than 7-fold under these conditions, resulting in a diffusion of sites where glycogen elongation occurred. Cumulatively, these data indicate that the hormonal regulation of glycogen synthesis rates in 3T3-L1 adipocytes is mediated in part through changes in the subcellular localization of glycogen synthase.