ErbB3 is unique among other members of the receptor tyrosine kinase family of growth factor receptors in that its kinase domain is enzymatically impaired. This renders it incapable of transducing a signal in response to ligand binding. However, in conjunction with ErbB2, ErbB3 is a potent mediator of signaling by the growth factor heregulin. Heregulin binding to ErbB3 induces formation of a heterodimeric complex with ErbB2, and this results in transactivation of the ErbB2 kinase. Although interaction between the extracellular domains of these receptors is an essential part of this process, it was not clear whether interaction between the cytoplasmic domains is also necessary for transactivation. By examining the abilities of a series of cytoplasmic domain mutants of ErbB3 to activate ErbB2, we have found a discrete sequence of three amino acid residues (LVI), located at the carboxyl-terminal end of the impaired ErbB3 kinase region, that is obligatory for transactivation. We conclude that formation of a functional ErbB2-ErbB3 signaling complex requires the presence of a specific structural feature within the ErbB3 cytoplasmic domain and suggest that ErbB2 transactivation results from a physical interaction between the cytoplasmic domains of these receptors.