Amplification of the Neu/c-erbB-2 receptor tyrosine kinase has been implicated as an important event in the genesis of human breast cancer. Indeed, transgenic mice bearing either an activated form of neu or the wild-type proto-oncogene under the transcriptional control of the mouse mammary tumor virus promoter-enhancer frequently develop mammary carcinomas (L. Bouchard, L. Lamarre, P. J. Tremblay, and P. Jolicoeur, Cell 57:931-936, 1989; C. T. Guy, M. A. Webster, M. Schaller, T. J. Parson, R. D. Cardiff, and W. J. Muller, Proc. Natl. Acad. Sci. USA 89:10578-10582, 1992; W. J. Muller, E. Sinn, R. Wallace, P. K. Pattengale, and P. Leder, Cell 54:105-115, 1988). Induction of mammary tumors in transgenic mice expressing the wild-type Neu receptor is associated with activation of the receptor's intrinsic tyrosine kinase activity (Guy et al., Proc. Natl. Acad. Sci. USA 89:10578-10582, 1992). Here, we demonstrate that activation of Neu in these transgenic mice occurs through somatic mutations located within the transgene itself. Sequence analyses of these mutations revealed that they contain in-frame deletions of 7 to 12 amino acids in the extracellular region proximal to the transmembrane domain. Introduction of these mutations into a wild-type neu cDNA results in an increased transforming ability of the altered Neu tyrosine kinase. These observations suggest that oncogenic activation of Neu in mammary tumorigenesis frequently occurs by somatic mutation.