The rat neu oncogene product encodes a 185 kDa receptor tyrosine kinase which is constitutively activated as a result of a single amino acid substitution (Val664-->Glu) within the transmembrane region. In this study, we show that the transforming activity of oncogenic p185neu (also termed Tneu) can be inhibited by co-expression of a truncated neu protein with a large cytoplasmic deletion (termed T691stop) which includes the tyrosine kinase domain. In cell lines co-expressing full-length and truncated neu proteins, we observed co-dimerization between full-length p185neu and truncated T691 stop, resulting in the formation of a kinase-inactive heteromeric complex. Phenotypic analysis of several different clones showed that the degree of inhibition of transformation in vitro and tumorigenicity in vivo was related to the ratio of full-length and truncated p185 proteins co-expressed in cells. These results provide evidence that expression of kinase-deficient neu proteins leads to co-dimerization that results in suppression of kinase activation and oncogenicity of associated p185neu-activated receptors. The mutant neu protein mediates inhibition in both transfected fibroblasts expressing oncogenic p185neu and mammalian cancer cells derived from a rat primary neuroglioblastoma expressing oncogenic p185neu. This truncated peptide may be important for the design of future therapies directed against erbB family oncoproteins.