Hyperglycemia has been shown to induce the p66shc expression leading to increased reactive oxygen species (ROS) generation and apoptosis. In the present study, we demonstrated that hyperglycemia induced p66shc expression in vascular smooth muscle cells. This induction was associated with an increase in apoptosis as assessed by the increase of capspase-3 enzymatic activity, cleaved caspase-3 protein, and the number of dead cells. The ability of IGF-I to inhibit apoptosis was also attenuated. Further studies showed that hyperglycemia-induced p66shc inhibited IGF-I-stimulated phosphoinositide (PI)-3 kinase and AKT activation. Mechanistic studies showed that knockdown of p66shc enhanced IGF-I-stimulated SHPS-1/p85, p85/SHP-2, and p85/Grb2 association, all of which are required for PI-3 kinase/AKT activation. These responses were attenuated by overexpression of p66shc. IGF-I-stimulated p85 and AKT recruitment to the cell membrane fraction was altered in the same manner. Disruption of p66shc-Src interaction using either a blocking peptide or by expressing a p66shc mutant that did not bind to Src rescued IGF-I-stimulated PI-3 kinase/AKT activation as well as IGF-I-dependent cell survival. Although the highest absolute level of ROS was detected in p66shc-overexpressing cells, the relative increase in ROS induced by hyperglycemia was independent of p66shc expression. Taken together, our data suggest that the increase in p66shc that occurs in response to hyperglycemia is functioning to inhibit IGF-I-stimulated signaling and that the incremental increase in SMC sensitivity to IGF-I stimulation that occurs in response to p66shc induction of ROS is not sufficient to overcome the inhibitory effect of p66shc on Src kinase activation.