The protein tyrosine kinase ZAP-70 plays an essential role in T-cell activation and development. After T-cell receptor stimulation, ZAP-70 is associated with the receptor and is phosphorylated on many tyrosine residues, including tyrosine 292 (Y-292), in the region between the C-terminal SH2 domain and the kinase domain (interdomain B). Here we show that a mutation of Y-292 (292F) or deletion of interdomain B enhanced the ability of ZAP-70 to reconstitute B-cell receptor stimulation-dependent NF-AT induction in a B-cell line deficient in Syk. In contrast, in a T-cell line, expression of 292F led to basal NF-AT induction independent of T-cell receptor stimulation. These results demonstrate that the role of Y-292 is to negatively regulate the function of ZAP-70 in lymphocytes. This appears to be a dominant function of interdomain B because deletion of most of interdomain B also resulted in a mutant of ZAP-70 with enhanced ability to reconstitute Syk-deficient DT-40 B cells. Since our biochemical studies did not reveal an effect of the 292F mutation on either the kinase activity of ZAP-70 or on the ability of ZAP-70 to bind to the receptor, we propose a model in which Y-292 interacts with an inhibitory protein to negatively regulate ZAP-70 function.