Human c-fps/fes when expressed at sufficiently high levels in NIH 3T3 cells can induce cellular transformation. To probe the mechanism of action of the c-fps/fes product NCP92, we have examined the biological and biochemical consequences of stabilizing phosphotyrosine in cells that overexpress NCP92. In this study we report that when cells expressing c-fps/fes are incubated with low concentrations of sodium vanadate, a tyrosine phosphatase inhibitor, the transforming activity of c-fps/fes can be potentiated by nearly two orders of magnitude. This effect was associated with a threefold increase in the level of phosphotyrosine in NCP92 and its major cellular substrates. Unlike c-src, NCP92 had a single tyrosine phosphorylation site, and vanadate treatment induced its phosphorylation in vivo. This was found to have a positive effect on NCP92 kinase specific activity, but at the low concentrations of vanadate that were used, this effect was very small. The results are consistent with the hypothesis that potentiation was a consequence of the stabilization of phosphotyrosine in critical targets of transformation of NCP92, rather than from a direct effect of vanadate on NCP92 kinase. The potentiating effect of vanadate was relatively specific for c-fps/fes; this reagent did not affect the high transforming activity of gag-v-fps/fes, nor did it enhance the less active c-ras, c-src, or EGF receptor genes, although the latter two genes encode tyrosine kinases. The specificity of the biological response of c-fps/fes to the stabilization of phosphotyrosine suggests that this molecule has a distinct mode of regulation and mechanism of action.