The SH2 domains of cytoplasmic signaling proteins bind to autophosphorylated growth factor receptors by direct recognition of specific phosphotyrosine-containing sites. To identify the phosphotyrosine involved in association of phospholipase C (PLC)-gamma 1 with the beta platelet-derived growth factor receptor (PDGFR), and to investigate which contiguous residues confer specificity for PLC-gamma 1, phosphotyrosine-containing glutathione S-transferase (GST) fusion proteins possessing different regions of the beta-PDGFR were incubated with lysates of Rat-2 cells that overexpress PLC-gamma 1. The phosphorylated C-terminal tail of the PDGFR bound PLC-gamma 1, but did not associate with phosphatidylinositol (PI) 3'-kinase or GTPase-activating protein (GAP). High-affinity binding of PLC-gamma 1 was dependent on phosphorylation of Tyr-1021. Creation of a new phosphorylation site by replacing Asp-1018 with tyrosine did not restore binding of PLC-gamma 1 in the absence of Tyr-1021, indicating that the location of the phosphorylated tyrosine is important for PLC-gamma 1 binding. Substitution of the proline at the +3 position relative to Tyr-1021 with methionine (Y1021IIP-->Y1021IIM) in the phosphorylated PDGFR tail did not alter PLC-gamma 1 association, but conferred binding activity towards PI 3'-kinase, indicating that this residue is critical in discriminating between PLC-gamma 1 and PI 3'-kinase. Progressive conversion of the three residues C-terminal to Tyr-1021 to the consensus for PI 3'-kinase binding (YMDM) allowed PI 3'-kinase association, but did not block PLC-gamma 1 binding, suggesting that additional residues other than the three residues immediately following the phosphotyrosine may contribute to the association of PLC-gamma 1 with the PDGFR. These results indicate that phosphorylation at Tyr-1021 in the tail of the PDGFR creates a specific binding site for PLC-gamma 1. Proline at the +3 position relative to Tyr-1021 is crucial in conferring specificity for binding to PLC-gamma 1.