The SH3 domain, comprised of approximately 60 residues, is found within a wide variety of proteins, and is a mediator of protein-protein interactions. Due to the large number of SH3 domain sequences and structures in the databases, this domain provides one of the best available systems for the examination of sequence and structural conservation within a protein family. In this study, a large and diverse alignment of SH3 domain sequences was constructed, and the pattern of conservation within this alignment was compared to conserved structural features, as deduced from analysis of eighteen different SH3 domain structures. Seventeen SH3 domain structures solved in the presence of bound peptide were also examined to identify positions that are consistently most important in mediating the peptide-binding function of this domain. Although residues at the two most conserved positions in the alignment are directly involved in peptide binding, residues at most other conserved positions play structural roles, such as stabilizing turns or comprising the hydrophobic core. Surprisingly, several highly conserved side-chain to main-chain hydrogen bonds were observed in the functionally crucial RT-Src loop between residues with little direct involvement in peptide binding. These hydrogen bonds may be important for maintaining this region in the precise conformation necessary for specific peptide recognition. In addition, a previously unrecognized yet highly conserved beta-bulge was identified in the second beta-strand of the domain, which appears to provide a necessary kink in this strand, allowing it to hydrogen bond to both sheets comprising the fold.