Receptor tyrosine kinases are integral components of cellular signaling pathways and are frequently deregulated in malignancies. The NTRK family of neurotrophin receptors mediate neuronal cell survival and differentiation, but altered NTRK signaling has also been implicated in oncogenesis. The ETV6-NTRK3 (EN) gene fusion occurs in human pediatric spindle cell sarcomas and secretory breast carcinoma, and encodes the oligomerization domain of the ETV6 transcription factor fused to the protein-tyrosine kinase domain of NTRK3. The EN protein functions as a constitutively active protein-tyrosine kinase with potent transforming activity in multiple cell lineages, and EN constitutively activates both the Ras-MAPK and phosphatidylinositol 3-kinase-Akt pathways. EN transformation is associated with constitutive tyrosine phosphorylation of insulin receptor substrate-1 (IRS-1). Further, IRS-1 functions as the adaptor protein linking EN to downstream signaling pathways. However, the exact nature of the EN-IRS-1 interaction remains unknown. We now demonstrate that EN specifically binds the phosphotyrosine binding domain of IRS-1 via an interaction at the C terminus of EN. An EN mutant lacking the C-terminal 19 amino acids does not bind IRS-1 and lacks transforming ability. Moreover, expression of an IRS-1 polypeptide containing the phosphotyrosine binding domain acts in a dominant negative manner to inhibit EN transformation, and overexpression of IRS-1 potentiates EN transforming activity. These findings indicate that EN.IRS-1 complex formation through the NTRK3 C terminus is essential for EN transformation.