In the present study, kinase-deficient mutants of the neu gene were constructed in order to generate dominant-negative receptor molecules, which should abolish phosphorylation of receptor complexes. One construct carried a mutation of the putative ATP-binding site (K758M), while the other mutant was generated by deletion of the kinase domain (ID400). Neither receptor showed phosphorylation by in vitro kinase assay. When NIH3T3 fibroblasts were co-transfected by the oncogenic neu gene and one of either construct, the transforming effect could be partially reversed. Therefore, kinase-negative mutations of the neu-encoded receptor seemed to have a dominant-negative effect on the action of the activated protein. To test this hypothesis, rat neurinoma cell lines containing oncogenic neu genes were transfected with the constructs. Expression of the kinase-defective mutants and reduced phosphorylation could be detected in different clones derived from single transfected cells. Striking growth inhibition and reduction of colony formation in soft agar were observed in these cell lines when compared with untransfected cells. Thus, kinase-deficient mutants exert a dominant-negative effect on phosphorylation of receptor complexes, resulting in a reversion of the transformed phenotype.