Bruton's tyrosine kinase (BTK) is a nonreceptor tyrosine kinase critical for B cell development and function. Mutations in BTK result in X-linked agammaglobulinemia (XLA) in humans and X-linked immunodeficiency (xid) in mice. Using a random mutagenesis scheme, we isolated a gain-of-function mutant called BTK* whose expression drives growth of NIH 3T3 cells in soft agar. BTK* results from a single point mutation in the pleckstrin homology (PH) domain, where a Glu is replaced by Lys at residue 41. BTK* shows an increase in phosphorylation on tyrosine residues and an increase in membrane targeting. Transforming activity requires kinase activity, a putative autophosphorylation site, and a functional PH domain. Mutation of the SH2 or SH3 domains did not affect the activity of BTK*. Expression of BTK* could also relieve IL-5 dependence of a B lineage cell line. These results show that transformation activation and regulation of BTK are critically dependent on the PH domain.