We have investigated the biological function of an unidentified human growth factor, the ligand of the putative HER2 receptor, by characterizing the signalling properties of its receptor. HER2 (or c-erbB-2), the human homolog of the rat neu proto-oncogene, encodes a transmembrane glycoprotein of the tyrosine kinase family that appears to play an important role in human breast carcinoma. Since a potential ligand for HER2 has not yet been identified, it has been difficult to analyze the biochemical properties and biological function of this cell surface protein. For this reason, we replaced the HER2 extracellular domain with the closely related ligand binding domain sequences of the epidermal growth factor (EGF) receptor, and examined the ligand-induced biological signalling potential of this chimeric HER1-2 protein. This HER1-2 receptor is targetted to the cell surface of transfected NIH 3T3 cells, forms high and low affinity binding sites, and generates normal mitogenic and cell transforming signals upon interaction with EGF or TGF alpha. The constitutive activation of wild-type HER2 in transfected NIH 3T3 cells suggests the possibility that these cells synthesize the as yet unidentified HER2 ligand and activate HER2 by an autocrine mechanism.