Kaposi's sarcoma-associated herpesvirus (KSHV) is consistently identified in Kaposi's sarcoma and body cavity-based lymphoma. KSHV encodes a transforming protein called K1 which is structurally similar to lymphocyte receptors. We have found that a highly conserved region of the cytoplasmic domain of K1 resembles the sequence of immunoreceptor tyrosine-based activation motifs (ITAMs). To demonstrate the signal-transducing activity of K1, we constructed a chimeric protein in which the cytoplasmic tail of the human CD8alpha polypeptide was replaced with that of KSHV K1. Expression of the CD8-K1 chimera in B cells induced cellular tyrosine phosphorylation and intracellular calcium mobilization upon stimulation with an anti-CD8 antibody. Mutational analyses showed that the putative ITAM of K1 was required for its signal-transducing activity. Furthermore, tyrosine residues of the putative ITAM of K1 were phosphorylated upon stimulation, and this allowed subsequent binding of SH2-containing proteins. These results demonstrate that the KSHV transforming protein K1 contains a functional ITAM in its cytoplasmic domain and that it can transduce signals to induce cellular activation.