Transformation of cells by the src oncogene causes dramatic changes in adhesive structures. In v-src-transformed 3Y1 rat fibroblasts (3Y1-src), there are actin-rich protrusive structures called podosomes by which attachment to the extracellular matrix is thought to occur. In this study, we found that neural Wiskott-Aldrich syndrome protein (N-WASP) colocalizes with filamentous actin (F-actin) in podosomes. Expression of dominant-negative mutants of N-WASP, Deltacof N-WASP and DeltaVPH N-WASP, both of which are incapable of activating the Arp2/3 complex, suppressed podosome formation, suggesting that N-WASP is essential in this process. Localization of N-WASP in podosomes appears to be attributable to interaction between N-WASP and the SH3 domain of cortactin. Indeed, microinjection of the cortactin SH3 domain suppressed podosome formation. We also observed that 3Y1-src cells cultured on fibronectin degrade the fibronectin primarily at the podosomes and that the inhibition of podosome formation by Deltacof N-WASP abolishes the fibronectin degradation. These results suggest the importance of N-WASP in podosome formation and extracellular matrix degradation, which are processes thought to underlie the invasive phenotype of 3Y1-src cells.