The protein tyrosine kinase c-Src is negatively regulated by phosphorylation of Tyr527 in its C-terminal tail. The repressed state is achieved through intramolecular interactions involving the phosphorylated tail, the Src homology 2 (SH2) domain and the SH3 domain. Both the SH2 and SH3 domains have also been shown to mediate the intermolecular interaction of Src with several proteins. To test which amino acids of the Src SH3 domain are important for these interactions, and whether the intra- and intermolecular associations involve the same residues, we carried out a detailed mutational analysis of the presumptive interaction surface. All mutations of conserved hydrophobic residues had an effect on both inter- and intramolecular interactions of the Src SH3 domain, although not all amino acids were equally important. Chimeric molecules in which the Src SH3 domain was replaced with those of spectrin or Lck showed derepressed kinase activity, whereas a chimera containing the Fyn SH3 domain was fully regulated. Since spectrin and Lck SH3 domains share the conserved hydrophobic residues characteristic of SH3 domains, other amino acids must be important for specificity. Mutational analysis of non- or semi-conserved residues in the RT and n-Src loops showed that some of these were also involved in inter- and intramolecular interactions. Stable transfection of selected SH3 domain mutants into NIH-3T3 cells showed that despite elevated levels of phosphotyrosine, the cells were morphologically normal, indicating that the SH3 domain was required for efficient transformation of NIH-3T3 cells by Src.