Dynamic regulation of the cell surface expression of adhesion molecules is an important mechanism for controlling neuronal growth cone motility and guidance. Clathrin-mediated vesicular internalization of L1 via the tyrosine-based endocytosis motif YRSL regulates adhesion and signaling by this Ig superfamily molecule. Here, we present evidence that tyrosine-1176 (Y1176) of the YRSL motif is phosphorylated in vivo. The nonreceptor tyrosine kinase (p60src) is implicated in L1-mediated neurite outgrowth, and we find that p60src phosphorylates Y1176 in vitro. Phosphorylation of Y1176 prevents L1 binding to AP-2, an adaptor required for clathrin-mediated internalization of L1. mAb 74-5H7 recognizes the sequence immediately NH2-terminal to the tyrosine-based motif and binds L1 only when Y1176 is dephosphorylated. 74-5H7 identifies a subset of L1 present at points of cell-cell contact and in vesicle-like structures that colocalize with an endocytosis marker. L1-L1 binding or L1 cross-linking induces a rapid increase in 74-5H7 immunoreactivity. Our data suggest a model in which homophilic binding or L1 cross-linking triggers transient dephosphorylation of the YRSL motif that makes L1 available for endocytosis. Thus, the regulation of L1 endocytosis through dephosphorylation of Y1176 is a critical regulatory point of L1-mediated adhesion and signaling.