The biological and biochemical properties of pp60c-src are regulated, in part, by phosphorylation at Tyr-416 and Tyr-527. The tyrosine kinase and transforming activities of pp60c-src are suppressed by phosphorylation at Tyr-527, whereas full activation of pp60c-src requires phosphorylation at Tyr-416. To test specifically the significance of the negatively charged phosphate moieties on these tyrosine residues, we have substituted the codons for both residues with codons for either Glu or Gln. A negatively charged Glu at position 527 was unable to mimic a phosphorylated Tyr at this position, and, in consequence, the mutated pp60c-src was activated and transforming. Similarly, substitution of Tyr-416 with Glu was unable to stimulate the activities of the enzyme. However, mutagenesis of Tyr-416 to Gln (to form the mutant 416Q) activated the kinase activity approximately twofold over that observed for wild-type pp60c-src. When introduced into the mutant 527F (containing Phe-527 instead of Tyr), the double mutant 416Q-527F exhibited weak transforming activity. This is in contrast to the other double mutants 416E-527F and 416F-527F, which were nontransforming. The biochemical basis by which 416Q activates pp60c-src is not understood but probably involves some local conformational perturbation. Deletion of residues 519 to 524 (RH5), a region previously shown to be necessary for association with middle-T antigen, led to loss of phosphorylation at Tyr-527 and activation of the enzymatic and focus-forming activities of pp60c-src. Hence, the sequences necessary for complex formation with middle-T antigen may also be required by the kinase(s) which phosphorylates Tyr-527 in vivo. This suggests that normal cells contain cellular proteins which are analogous to middle-T antigen and whose action regulates the activity of pp60c-src by controlling phosphorylation or dephosphorylation at residue 527.