Bruton's tyrosine kinase (Btk) plays a crucial role in B cell development. Overexpression of Btk with a Src family kinase increases tyrosine phosphorylation and catalytic activity of Btk. This occurs by transphosphorylation at Y551 in the Btk catalytic domain and the enhancement of Btk autophosphorylation at a second site. A gain-of-function mutant called Btk* containing E41 to K change within the pleckstrin homology domain induces fibroblast transformation. Btk* enhances the transphosphorylation of Y551 by endogenous Src family tyrosine kinases and autophosphorylation at the second site. We mapped the major Btk autophosphorylation site to Y223 within the SH3 domain. Mutation of Y223 to F blocks Btk autophosphorylation and dramatically potentiates the transforming activity of Btk* in fibroblasts. The location of Y223 in a potential ligand-binding pocket suggests that autophosphorylation regulates SH3-mediated signaling by Btk.