The product of the erbB-2 gene is a 185-kD receptor-like glycoprotein. erbB-2 gp185 displays constitutive tyrosine kinase activity and transforms NIH 3T3 cells when expressed 100-fold over the normal levels. We have analyzed the role of tyrosine kinase function and of receptor autophosphorylation in the regulation of erbB-2 biological activity. Abolition of erbB-2 gp185 tyrosine kinase function resulted in complete loss of its transforming activity and the absence of in vivo tyrosine phosphorylation. The steady-state content of phosphotyrosine in erbB-2 gp185 was found to be solely dependent on receptor autophosphorylation and to be dependent on the specific enzymatic activity of the erbB-2 protein. The major sites of erbB-2 autophosphorylation were shown to be in its COOH-terminal domain. Biological analysis of erbB-2 mutants containing either individual or multiple Tyr----Phe substitutions at the potential sites of autophosphorylation revealed that autophosphorylation upregulates erbB-2 gp185 transforming activity. Autophosphorylation did not modulate receptor turnover. A Tyr----Phe substitution of erbB-2 Tyr-877 homologous to pp60c-src Tyr-416 did not alter erbB-2 biological and biochemical properties, thus excluding the possibility that phosphorylation of this residue, located in the kinase domain, modulates erbB-2 gp185 catalytic function. Hence, autophosphorylation of tyrosine residues localized in its COOH terminus appears to be required for optimal coupling of erbB-2 gp185 with its mitogenic pathway.