Alternative splice variants of fibroblast growth factor receptor 2 (FGFR2) IIIb, designated C1, C2, and C3, possess progressive reduction in their cytoplasmic carboxyl termini (822, 788, and 769 residues, respectively), with preferential expression of the C2 and C3 isoforms in human cancers. We determined that the progressive deletion of carboxyl-terminal sequences correlated with increasing transforming potency. The highly transforming C3 variant lacks five tyrosine residues present in C1, and we determined that the loss of Tyr-770 alone enhanced FGFR2 IIIb C1 transforming activity. Because Tyr-770 may compose a putative YXXL sorting motif, we hypothesized that loss of Tyr-770 in the 770YXXL motif may cause disruption of FGFR2 IIIb C1 internalization and enhance transforming activity. Surprisingly, we found that mutation of Leu-773 but not Tyr-770 impaired receptor internalization and increased receptor stability and activation. Interestingly, concurrent mutations of Tyr-770 and Leu-773 caused 2-fold higher transforming activity than caused by the Y770F or L773A single mutations, suggesting loss of Tyr and Leu residues of the 770YXXL773 motif enhances FGFR2 IIIb transforming activity by distinct mechanisms. We also determined that loss of Tyr-770 caused persistent activation of FRS2 by enhancing FRS2 binding to FGFR2 IIIb. Furthermore, we found that FRS2 binding to FGFR2 IIIb is required for increased FRS2 tyrosine phosphorylation and enhanced transforming activity by Y770F mutation. Our data support a dual mechanism where deletion of the 770YXXL773 motif promotes FGFR2 IIIb C3 transforming activity by causing aberrant receptor recycling and stability and persistent FRS2-dependent signaling.