Using the association between the pp60c-src/polyoma virus middle T antigen (mT) complex and phosphatidylinositol 3'-kinase (PI 3-kinase) as a prototype for phosphoprotein-SH2 domain interactions, we tested whether a nonhydrolyzable phosphonopeptide would inhibit association. (Phosphonomethyl)-phenylalanine (Pmp) is a nonnatural analogue of phosphotyrosine in which the > C-O-PO3H2 moiety is replaced by > C-CH2-PO3H2. We synthesized a 13 amino acid phosphonopeptide (mT-Pmp315), a related phosphopeptide (mT-pY315), and an unmodified sequence (mT-Y315), all corresponding to the pp60c-src-phosphorylated site of the mT which is within a YMXM motif common to proteins that bind to and activate PI 3-kinase. Only the phosphonopeptide persistently blocked the in vitro association of the baculovirus-expressed pp60c-src/mT complex with cytosolic PI 3-kinase activity. Sustained inhibition of association by the phosphopeptide required the additional presence of vanadate, a potent protein tyrosine phosphatase (PTPase) inhibitor. The phosphopeptide and L-phosphonopeptide bound tightly (KD approximately 10-20 nM) and specifically to isolated SH2 domains of PI 3-kinase p85, demonstrating that the mechanism of inhibited association is competitive binding to PI 3-kinase SH2 domains. We conclude that the appropriate phosphonopeptide sequence inhibits the interaction between a tyrosine-phosphorylated protein and a cognate SH2 domain-containing protein and is resistant to the actions of PTPases. Proteolytically stable phosphonopeptide derivatives should be useful inhibitors of protein-protein interactions when introduced into cells and may provide a basis for the rational design of a new class of chemotherapeutic agent.