Amplification and overexpression of erbB-2/neu is an important determinant in the initiation and progression of human breast cancer. Indeed, transgenic mice that over-express the neu proto-oncogene heritably develop mammary adenocarcinomas. Tumorigenesis in these transgenic strains is associated with activation of the intrinsic catalytic activity of Neu. In many of these tumors, activation of Neu occurs as a result of somatic mutations located within the transgene itself. Examination of the altered neu transcripts revealed the presence of in-frame deletions that encode aberrant Neu receptors lacking 5 to 12 amino acids within the extracellular domain proximal to the transmembrane region of Neu. In addition to these deletion mutants we have also detected single point mutations within this juxta-transmembrane region. The majority of the mutations analyzed affect the one of several conserved cysteine residues present within this region. Introduction of these activating mutations into the wild-type neu cDNA results in its oncogenic conversion. Taken together, these observations suggest that this cysteine-rich region plays an important role in regulating the catalytic activity of Neu.