The chicken proto-oncoprotein c-Src is phosphorylated by p34cdc2 during mitosis concomitant with increased c-Src tyrosine kinase activity. On the basis of indirect evidence, we previously suggested that this is caused by partial dephosphorylation at Tyr-527, the phosphorylation of which suppresses c-Src kinase activity. In support of this hypothesis, we now show that treatment of cells with a protein tyrosine phosphatase inhibitor, sodium vanadate, blocks the mitotic increase in Src kinase activity. Also, we show that an amino-terminal mutation that prevents myristylation (and membrane localization) of c-Src does not interfere with the p34cdc2-mediated phosphorylations but blocks both mitotic dephosphorylation of Tyr-527 (in kinase-defective Src) and stimulation of c-Src kinase activity. Furthermore, in unsynchronized cells, the kinase activity of nonmyristylated c-Src is suppressed by 60% relative to wild-type c-Src, presumably because of increased Tyr-527 phosphorylation. Consistent with this, the Tyr-527 dephosphorylation rate measured in cell homogenates is much higher for wild-type, myristylated c-Src than for nonmyristylated c-Src. Tyr-527 phosphatase activity was primarily associated with the nonsoluble subcellular fraction. These findings suggest that the phosphatase(s) that acts on Tyr-527 is membrane bound and indicate that membrane localization of c-Src is necessary for its mitotic activation by dephosphorylation of Tyr-527.Chicken c-src is the cellular homolog of the Rous sarcoma virus transforming gene v-src. Both genes encode membrane-associated 60-kDa phosphoproteins with tyrosine kinase activity (25). Association of v-Src and c-Src with cellular membranes requires covalent attachment of myristate to Gly at position 2, and mutation of this residue prevents myristylation and membrane binding (3, 12,31,33,34). Other amino-terminal sequence determinants are also involved in membrane association (18), and at least for v-Src, association may involve a 32-kDa Src receptor protein (29, 30). Myristylation is not required for the mitogenic effect of v-Src (4) but is required for transformation of chicken embryo fibroblasts by v-Src (10, 17) and activated c-Src (31, 41) (although our preliminary results suggest that nonmyristylated, activated c-Src is weakly transforming in mouse fibroblasts).During mitosis, c-Src is phosphorylated by p34cdc2 or a related kinase at three amino-terminal serine and threonine residues, and c-Src kinase activity is increased (6,22,35,38,40). These mitosis-specific phosphorylations (MSPs) retard c-Src electrophoretic mobility but, by themselves, do not stimulate its kinase activity (22, 38). C-Src kinase activity can be negatively regulated by phosphorylation of its C-terminal Tyr-527 residue (5, 20, 28), and we (1, 37) and others (16) have proposed that a 10 to 20% decrease in Tyr-527 phosphorylation is the direct cause of its mitotic activation. Although we cannot reliably directly detect such a small decrease, the kinase activities of c-Src mutants lacking Tyr-527 are not fu...