Cells expressing mutant epidermal growth factor (EGF) receptors have been used to study mechanisms through which EGF increases phospholipase C (PLC) activity. C-terminal truncation mutant EGF receptors are markedly impaired in their ability to increase inositol phosphate formation compared with wild- type EGF receptors. Mutation of the single tyrosine self-phosphorylation site at residue 992 to phenylalanine in an EGF receptor truncated at residue 1000 abolished the ability of EGF to increase inositol phosphate formation. C- terminal deletion mutant receptors that are impaired in their ability to increase inositol phosphate formation effectively phosphorylate PLC-γ at the same tyrosine residues as do wild-type EGF receptors. EGF enhances PLC-γ association with wild-type EGF receptors but not with mutant receptors lacking sites of tyrosine phosphorylation. These results indicate that formation of a complex between self-phosphorylated EGF receptors and PLC-γ is necessary for enzyme activation in vivo. We propose that both binding of PLC-γ to activated EGF receptors and tyrosine phosphorylation of the enzyme are necessary to elicit biological responses. Kinase-active EGF receptors lacking sites of tyrosine phosphorylation are unable to signal increased inositol phosphate formation and increases in cytosolic Ca2+ concentration.