We have developed a competition binding assay to quantify relative affinities of isolated Src-homology 2 (SH2) domains for phosphopeptide sequences. Eleven synthetic 11-12-amino acid phosphopeptides containing YMXM or YVXM recognition motifs bound to a PI 3-kinase p85 SH2 domain with highest affinities, including sequences surrounding phosphorylated tyrosines of the PDGF, CSF-1/c-Fms, and kit-encoded receptors, IRS-1, and polyoma middle T antigens; matched, unphosphorylated sequences did not bind. A scrambled YMXM phosphopeptide or sequences corresponding to the GAP or PLC-gamma SH2 domain binding motifs of the PDGF, FGF, and EGF receptors bound to the p85 SH2 domain with 30-100-fold reduced affinity, indicating that this affinity range confers specificity. Binding specificity was appropriately reversed with an SH2 domain from PLC-gamma: a phosphopeptide corresponding to the site surrounding PDGF receptor Tyr1021 binds with approximately 40-fold higher affinity than a YMXM-phosphopeptide. We conclude that essential features of specific phosphoprotein/SH2 domain interactions can be reconstituted using truncated versions of both the phosphoprotein (a phosphopeptide) and cognate SH2 domain-containing protein (the SH2 domain). SH2 domain binding specificity results from differences in affinity conferred by the linear sequence surrounding phosphotyrosine.