HER3 (also known as c-Erb-b3) is a type I receptor tyrosine kinase similar in sequence to the epidermal growth factor (EGF) receptor. The extracellular segment of this transmembrane receptor contains four domains. Domains I and II are similar in sequence to domains III and IV, respectively, and domains II and IV are cysteine-rich. We show that the EGF-like domain of heregulin (hrg) binds to domains I and II of HER3, in contrast to the EGF receptor, for which prior studies have shown that a construct consisting of domains III and portions of domain IV binds EGF. Next, we identified a putative hrg binding site by limited proteolysis of the recombinant extracellular domains of HER3 (HER3-ECD(I-IV)) in both the presence and absence of hrg. In the absence of hrg, HER3-ECD(I-IV) is cleaved after position Tyr(50), near the beginning of domain I. Binding of hrg to HER3-ECD(I-IV) fully protects position Tyr(50) from proteolysis. To confirm that domain I contains a hrg binding site, we expressed domains I and II (HER3-ECD(I-II)) and find that it binds hrg with 68 nm affinity. These data suggest that domains I and II of HER3-ECD(I-IV) act as a functional unit in folding and binding of hrg. Thus, our biochemical findings reinforce the structural hypothesis of others that HER3-ECD(I-IV) is similar to the insulin-like growth factor-1 receptor (IGF-1R), as follows: 1) The protected cleavage site in HER3-ECD(I-IV) corresponds to a binding footprint in domain I of IGF-1R; 2) HER3-ECD(I-II) binds hrg with a 68 nm dissociation constant, supporting the hypothesis that domain I is involved in ligand binding; and 3) the large accessible surface area (1749 A) of domain L1 of IGF-1R that is buried by domain S1, as well as the presence of conserved contacts in this interface of type 1 RTKs, suggests that domains L1 and S1 of IGF-1R function as a unit as observed for HER3-ECD(I-II). Our results are consistent with the proposal that HER3 has a structure similar to IGF-1R and binds ligand at a site in corresponding domains.