T-cell development is critically dependent on the activities of the Src-family kinases p56(lck) and p59(fyn). While Lck plays a dominant role in the initiation of T-cell receptor (TCR) signaling and in thymocyte differentiation, Fyn plays a more subtle regulatory role. We sought to determine the role of intracellular localization in the differing functions of Lck and Fyn in T cells. By generating transgenic mice that express chimeric Lck-Fyn proteins, we showed that the N-terminal unique domain determines the intracellular localization and function of Lck in pre-TCR and mature αβTCR signaling in vivo. Furthermore, coexpression of a "domain-swap" Lck protein containing the Fyn unique domain with an inducible Lck transgene resulted in the development of thymomas. In contrast to previous reports of Lck-driven thymomas, tumor development was dependent on either pre-TCR or mature TCR signals, and was completely ablated when mice were crossed to a recombination activating gene 1 (Rag1)-deficient background. These data provide a mechanistic basis for the differing roles of Lck and Fyn in T-cell development, and show that intracellular localization as determined by the N-terminal unique domains is critical for Src-family kinase function in vivo.