Recent studies indicate that insulin stimulation of glucose transporter (GLUT)4 translocation requires at least two distinct insulin receptor–mediated signals: one leading to the activation of phosphatidylinositol 3 (PI-3) kinase and the other to the activation of the small GTP binding protein TC10. We now demonstrate that TC10 is processed through the secretory membrane trafficking system and localizes to caveolin-enriched lipid raft microdomains. Although insulin activated the wild-type TC10 protein and a TC10/H-Ras chimera that were targeted to lipid raft microdomains, it was unable to activate a TC10/K-Ras chimera that was directed to the nonlipid raft domains. Similarly, only the lipid raft–localized TC10/ H-Ras chimera inhibited GLUT4 translocation, whereas the TC10/K-Ras chimera showed no significant inhibitory activity. Furthermore, disruption of lipid raft microdomains by expression of a dominant-interfering caveolin 3 mutant (Cav3/DGV) inhibited the insulin stimulation of GLUT4 translocation and TC10 lipid raft localization and activation without affecting PI-3 kinase signaling. These data demonstrate that the insulin stimulation of GLUT4 translocation in adipocytes requires the spatial separation and distinct compartmentalization of the PI-3 kinase and TC10 signaling pathways.