We have investigated the roles of eukaryotic initiation factor 4E (eIF-4E), the cap-binding protein, and the translational regulator, PHAS-I, in the effects of insulin and alloxan-induced diabetes on protein synthesis in rat skeletal muscle. Diabetes increased the amount of eIF-4E found in the inactive PHAS-I.eIF-4E complex by threefold, explaining in part the inhibitory effect of insulin deficiency on translation initiation. Insulin treatment of diabetic rats caused dissociation of the complex, consistent with the action of the hormone on reversing the inhibitory effect of diabetes on translation initiation. The effects of both insulin and diabetes on PHAS-I binding to eIF-4E appeared to be due to changes in PHAS-I phosphorylation. Neither insulin nor diabetes changed the phosphorylation state of eIF-4E. The results indicate that the effects of both insulin and diabetes on protein synthesis in skeletal muscle involve modulation of the interaction of PHAS-I and eIF-4E.