We have shown previously that the extracellular sequences of the human insulin receptor (IR) and the insulin-like growth factor I receptor (IGFR) have an inhibitory effect on protein tyrosine kinase (PTK) activity and on the biological functions of their respective Gag-receptor fusion proteins. To study the role of IGFR carboxyl sequence in modulation of the Gag-IGFR PTK and biological activities, five mutants, CM1, CM2, CM3, CM4, and CM5, containing carboxyl deletions of 17, 27, 47, 67, and 88 amino acids (aa), respectively, were constructed from the parental virus UIGFR encoding the Gag-IGFR. Deletion of up to 27 aa had little effect on the cell-transforming and PTK activities of UIGFR. Deletions of 47 aa in CM3 abolished PTK and transforming activities. Surprisingly, a further deletion of 20 aa in CM4 beyond that in CM3 reactivated the kinase and transforming activities. CM5, containing a deletion of 20 aa beyond that in CM4, had only marginal transforming and PTK activities. We conclude that deletion of the carboxyl region of the Gag-IGFR inactivates, instead of activating as in the case with Gag-IR, its transforming activity and the amino acid sequence 1250 to 1310 is essential for PTK and transforming activities. Analysis of the ability of the full-length IGFR and its mutant receptors described above to associate with phosphatidylinositol 3 kinase indicated that the association required PTK activity and tyrosine phosphorylation of the receptors and correlated well with their transforming activities. The carboxyl 88 aa are not essential for the association.