src homology region 2 and 3 (SH2 and SH3) domains are conserved noncatalytic regions originally described in cytoplasmic tyrosine kinases and subsequently identified in phospholipase C gamma 1 (PLC gamma 1), GTPase-activating protein of ras, and other signaling proteins. Although numerous studies indicate that SH2 domains promote protein-protein interactions by specific binding to tyrosine phosphorylated proteins, the function of SH3 domains is not known. The SH2 domain of PLC gamma 1 binds to certain tyrosine-phosphorylated growth factor receptors, and following phosphorylation on Tyr783 the enzymatic activity of PLC gamma 1 is enhanced, leading to phosphatidylinositol hydrolysis. To determine the functional role of the SH2 domain(s) on substrate phosphorylation in quantitative terms, we have expressed in Escherichia coli PLC gamma 1 constructs encoding the region containing Tyr783 and Tyr771, their two flanking SH2 domains and the SH3 domain, and five different deletion mutants of this region. These six proteins were purified and subjected to quantitative phosphorylation by the epidermal growth factor receptor (EGFR). Analysis of the kinetics of substrate phosphorylation revealed similar Vmax for the phosphorylation of the various mutant proteins. However, the affinity was enhanced for substrates containing SH2 domains: from S0.5 (average apparent Km) of 110 microM to S0.5 of 20 microM with the addition of a single SH2 domain and S0.5 of 3-4 microM for mutants containing two SH2 domains. The presence of the SH3 domain did not influence the apparent Km of substrate phosphorylation. These results demonstrate that the presence of the SH2 domain in PLC gamma 1 lowers the apparent Km (increases the affinity) of substrate phosphorylation by the EGFR, thereby facilitating PLC gamma 1 phosphorylation and activation.