The activities of Src-family non-receptor tyrosine kinases are regulated by structural changes that alter the orientation of key residues within the catalytic domain. In this study, we investigate the effects of activation loop mutations on regulation of the lymphocyte-specific kinase Lck (p56lck). Substitution of 5 - 7 residues amino terminal to the conserved activation loop tyrosine (Y394) increases kinase activity and oncogenic potential regardless of regulatory C-terminal tail phosphorylation levels (Y505), while most mutations in the 13 residues carboxyl to Y394 decrease kinase activity. Phosphorylation of the C-terminal regulatory tail is carried out by the cytosolic tyrosine kinase Csk and we find that mutations upstream or downstream of Y394 or mutation of Y394 do not affect the level of Y505 phosphorylation. In addition, we report that mutations on either side of Y394 affect substrate specificity in vivo. We conclude that the high degree of conservation across the entire activation loop of Src-family kinases is critical for normal regulation of kinase activity and oncogenicity as well as substrate selection. Oncogene (2000) 19, 3961 - 3961.