In eukaryotic cells, the SH2 and PTB domains mediate protein-protein interactions by recognizing phosphotyrosine residues on target proteins. Here we make the unexpected finding that the C2 domain of PKCdelta directly binds to phosphotyrosine peptides in a sequence-specific manner. We provide evidence that this domain mediates PKCdelta interaction with a Src binding glycoprotein, CDCP1. The crystal structure of the PKCdelta C2 domain in complex with an optimal phosphopeptide reveals a new mode of phosphotyrosine binding in which the phosphotyrosine moiety forms a ring-stacking interaction with a histidine residue of the C2 domain. This is also the first example of a protein Ser/Thr kinase containing a domain that binds phosphotyrosine.