Reversible assembly of intracellular signaling complexes is, in some cases, mediated by direct binding of a Src homology 2 (SH2) domain of one protein to a phosphotyrosine moiety of another protein (Cantley, L. C., Auger, K. R., Carpenter, C. L., Duckworth, B., Graziani, A., Kapeller, R., and Soltoff, S. (1991) Cell 64, 281-302). Using a degenerate phosphotyrosine-containing peptide library, we showed that individual SH2 domains recognize phosphotyrosine in a specific sequence context to provide fidelity in signaling (Songyang, Z., Shoelson, S. E., Chaudhuri, M., Gish, G., Pawson, T., Haser, W. G., King, F., Roberts, T., Ratnofsky, S., Lechleider, R. J., Neel, B. G., Birge, R. B., Fajardo, J. E., Chou, M. M., Hanafusa, H., Schaffhausen, B., and Cantley, L. C. (1993) Cell 72, 767-778). Recently a second type of phosphotyrosine interaction domain (PID) or phosphotyrosine-binding domain (PTB) was discovered in the amino terminus of the SHC proto-oncoprotein (Kavanaugh, W. M., and Williams, L. (1994) Science 266, 1862-1865; Blaikie, P., Immanuel, D., Wu, J., Li, N., Yajnik, V., and Margolis, B. (1994) J. Biol. Chem. 269, 32031-32034). Here we demonstrate, using a phosphotyrosine peptide library, that the SHC PID domain preferentially binds to the sequence Asn-Pro-Xaa-phosphotyrosine. This motif is in agreement with sequences at sites implicated in in vivo SHC binding. These results indicate that while SH2 domains predominantly interact with specific residues carboxyl-terminal of phosphotyrosine, the PID domain has high specificity for residues amino-terminal of phosphotyrosine.