Recently, it was demonstrated that prolonged hyperinsulinism associated with hypoglycemia, both in vivo and in vitro, caused covalent glycoinositolphospholipid (GPI) binding to the C termini of both hemoglobin b-chains, which resulted in the formation of a novel, hitherto unrecognized, minor hemoglobin fraction (GPI-Hb) (Niketic et al., Biochem. Biophys. Res. Commun. 239 (1997) 435). In this study it was demonstrated that exposure of erythrocyte membranes to insulin causes the activation of membrane protease as well as that the formation of GPI-Hb parallels its activity. It is suggested that the insulin-activated protease is able to catalyze, albeit slowly, the transpeptidation, i.e., the replacement of the carboxy-terminal amino acid(s) residues of the Hb b-chains with GPI as an exogenous nucleophile. To our knowledge the present results show for the first time that insulin stimulates protease activity in erythrocyte membranes, as well as that insulin-activated protease may be involved in post-translational GPI binding to proteins.