A protein has been identified that interacts specifically with both the Src homologous 3 (SH3) domain and carboxy-terminal sequences of the c-Abl tyrosine kinase. The cDNA encoding the Abl interactor protein (Abi-2), was isolated from a human lymphocyte library using the yeast two-hybrid system with the Abl SH3 domain as bait. Abi-2 binds to c-Abl in vitro and in vivo. Abi-2 is a novel protein that contains an SH3 domain and proline-rich sequences critical for binding to c-Abl. A basic region in the amino terminus of Abi-2 is homologous to the DNA-binding sequence of homeo-domain proteins. We show that Abi-2 is a substrate for the c-Abl tyrosine kinase. Expression of an Abi-2 mutant protein that lacks sequences required for binding to the Abl SH3 domain but retains binding to the Abl carboxyl terminus activates the transforming capacity of c-Abl. The properties of Abi-2 are consistent with a dual role as regulator and potential effector of the c-Abl protein and suggest that Abi-2 may function as a tumor suppressor in mammalian cells.