To promote glucose uptake into fat and muscle cells, insulin causes the translocation of GLUT4 glucose transporters from intracellular vesicles to the cell surface. Previous data support a model in which TUG traps GLUT4-containing vesicles and tethers them intracellularly in unstimulated cells and in which insulin mobilizes this pool of vesicles by releasing this tether. Here we show that TUG undergoes site-specific endoproteolytic cleavage, which separates a GLUT4-binding, N-terminal region of TUG from a C-terminal region previously suggested to bind an intracellular anchor. Cleavage is accelerated by insulin stimulation in 3T3-L1 adipocytes and is highly dependent upon adipocyte differentiation. The N-terminal TUG cleavage product has properties of a novel 18-kDa ubiquitin-like modifier, which we call TUGUL. The C-terminal product is observed at the expected size of 42 kDa and also as a 54-kDa form that is released from membranes into the cytosol. In transfected cells, intact TUG links GLUT4 to PIST and also binds Golgin-160 through its C-terminal region. PIST is an effector of TC10α, a GTPase previously shown to transmit an insulin signal required for GLUT4 translocation, and we show using RNAi that TC10α is required for TUG proteolytic processing. Finally, we demonstrate that a cleavage-resistant form of TUG does not support highly insulin-responsive GLUT4 translocation or glucose uptake in 3T3-L1 adipocytes. Together with previous results, these data support a model whereby insulin stimulates TUG cleavage to liberate GLUT4 storage vesicles from the Golgi matrix, which promotes GLUT4 translocation to the cell surface and enhances glucose uptake.