Several cytoplasmic tyrosine kinases contain a conserved, non-catalytic stretch of approximately 100 amino acids called the src homology 2 (SH2) domain, and a region of approximately 50 amino acids called the SH3 domain. SH2/SH3 domains are also found in several other proteins, including phospholipase C-gamma (PLC gamma). Recent studies indicate that SH2 domains promote association between autophosphorylated growth factor receptors such as the epidermal growth factor (EGF) receptor and signal transducing molecules such as PLC gamma. Because SH2 domains bind specifically to protein sequences containing phosphotyrosine, we examined their capacity to prevent tyrosine dephosphorylation of the EGF and other receptors with tyrosine kinase activity. For this purpose, various SH2/SH3 constructs of PLC gamma were expressed in Escherichia coli as glutathione-S-transferase fusion proteins. Our results show that purified SH2 domains of PLC gamma are able to prevent tyrosine dephosphorylation of the EGF receptor and other receptors with tyrosine activity. The inhibition of tyrosine dephosphorylation paralleled the capacity of various SH2-containing constructs to bind to the EGF receptor, suggesting that the tyrosine phosphatase and the SH2 domain compete for the same tyrosine phosphorylation sites in the carboxy-terminal tail of the EGF receptor. Analysis of the phosphorylation sites protected from dephosphorylation by PLC gamma-SH2 revealed substantial inhibition of dephosphorylation of Tyr992 at 1 microM SH2. This indicates that Tyr992 and its flanking sequence is the high-affinity binding site for SH2 domains of PLC gamma.(ABSTRACT TRUNCATED AT 250 WORDS)