To assess the importance of Neu activation during mammary tumorigenesis, altered receptors harboring in-frame deletions within the extracellular domain were expressed in transgenic mice. Females from several independent lines develop multiple mammary tumors that frequently metastasize to the lung. Tumor progression in these strains was associated with elevated levels of tyrosine-phosphorylated Neu and ErbB-3. Consistent with these observations, a survey of primary human breast tumors revealed frequent co-expression of both erbB-2 and erbB-3 transcripts. The ability of altered Neu receptors to induce mammary tumorigenesis in transgenic mice prompted us to examine whether similar mutations occurred in ErbB-2 during human breast cancer progression. Interestingly, an alternatively spliced form of erbB-2, closely resembling spontaneous activated forms of neu, was detected in human breast tumors. The ErbB-2 receptor encoded by this novel transcript harbors an in-frame deletion of 16 amino acids in the extracellular domain and can transform Rat-1 fibroblasts. Together, these observations argue that co-expression of ErbB-2 and ErbB-3 may play a critical role in the induction of human breast tumors, and raise the possibility that activating mutations in the ErbB-2 receptor may also contribute to this process.