The insulin-like growth factor type I (IGF-I) receptor can become tyrosine phosphorylated and enzymatically activated either in response to ligand or because of the activity of the Src tyrosine kinase (Peterson, J. E., Jelinek, T., Kaleko, M., Siddle, K., and Weber, M. J. (1994) J. Biol. Chem. 269, 27315-27321). The goal of the present study was to analyze the mechanistic basis and functional significance of the Src-induced phosphorylation and activation of the IGF-I receptor. 1) We mapped the sites of IGF-I receptor autophosphorylation to peptides representing three different receptor domains: tyrosines 943 and 950 in the juxtamembrane region; tyrosines 1131, 1135, and 1136 within the kinase domain; and tyrosine 1316 in the carboxyl-terminal domain. The juxtamembrane and kinase-domain peptides were phosphorylated both in vivo and in vitro. The carboxyl-terminal site, although phosphorylated in vitro and in src-transformed cells, was not a major site of ligand-induced phosphorylation in vivo. 2) We determined that the sites of Src-induced phosphorylation of the IGF-I receptor are the same as the ligand-induced autophosphorylation sites and that the Src kinase can catalyze these phosphorylations directly. 3) We showed that cells cultured from mice in which the IGF-I receptor has been knocked out by homologous recombination are defective for morphological transformation by src. Thus, the Src kinase can substitute for the receptor kinase in phosphorylating and activating the IGF-I receptor, and this receptor phosphorylation and activation are essential for transformation by src.