The avian sarcoma virus UR2 codes for an oncogenic Gag-Ros fusion protein-tyrosine kinase (PTK). We have previously derived two retroviruses, T6 and NM1, coding for oncogenic Gag-insulin receptor and Gag-insulin-like growth factor I receptor (IGFR) fusion proteins, respectively. The Gag-IGFR fusion protein dimerizes, whereas Gag-Ros does not. To identify sequences affecting dimerization and the effect of dimerization on signaling and biological functions, we generated recombinants exchanging the extracellular and transmembrane sequences among the three fusion receptors. The presence of multiple cysteines in the Gag sequence appears to preclude dimerization, since deletion of the 3' cysteine residue allows for dimerization. Most of the chimeric receptors retain high PTK activity and induce transformation regardless of their configuration on the cell surface. UT, a UR2/T6 chimera, retained mitogenic activity but has a markedly reduced transforming ability, while UN7, a UR2/NM1 recombinant, which also harbors Y950F and F951S mutations in IGFR, exhibits dramatic reductions in both activities. All of the fusion receptors can phosphorylate insulin receptor substrate 1 and activate PI 3-kinase. UT protein induces Shc phosphorylation, whereas UN7 protein does not, but both are unable to activate mitogen-activated protein kinase. Our results show that overexpressed oncogenic Gag-fusion receptors do not require dimerization for their signaling and transforming functions and that the extracellular and transmembrane sequences of a receptor PTK can affect its specific substrate interactions.