Protein-protein interactions are often mediated by the recognition of short continuous amino acid stretches on target proteins by specific binding domains. Affinity-based selection strategies have successfully been used to define recognition motifs for a large series of such protein domains. However, in many biological systems specificity of interaction may be of equal or greater importance than affinity. To address this issue we have developed a peptide library screening technology that can be used to directly define ligands for protein domains based on both affinity and specificity of interaction. We demonstrate the value of this approach by the selection of peptide ligands that are either highly specific for the Grb2 Src homology 2 (SH2) domain or that are cross-reactive between a group of related SH2 domains. Examination of previously identified physiological ligands for the Grb2 SH2 domain suggests that for these ligands regulation of the specificity of interaction may be an important factor for in vivo ligand selection.T he intracellular organization that enables a cell to respond to external stimuli consists of a complex web of signal transduction pathways. Key factors in the regulation of cellular signaling are the protein binding domains-small, conserved protein modules that mediate intracellular protein-protein interactions. Many of these domains, such as the families of SH2 (Src homology 2), SH3 (Src homology 3), PTB (phosphotyrosine binding), or PDZ (postsynaptic density-95͞Discs large͞zona occludens-1) domains, use short peptide sequences for ligand recognition (1). For example, the binding of SH2 domains to target proteins involves the recognition of a phosphorylated tyrosine residue, and specificity of individual SH2 domains is mediated by the recognition of amino acid residues immediately C-terminal to the phospho-tyrosine (2). The binding preferences of SH2 domains have been studied extensively through the use of peptide libraries, and predictions for the optimal binding motifs for a large number of SH2 domains have been obtained in this manner (3,4). In addition, such binding motifs have been used extensively as lead structures for the design of selective small-molecular SH2 inhibitors (5, 6). Importantly, in traditional library screening strategies used to define SH2 ligand motifs the selection of ligands is exclusively based on the strength of the SH2-phospho-peptide interaction. Consequently, the motifs that are identified in this manner describe ligands with an optimal affinity for a given SH2 domain (here named affinity motifs). Because both affinity and specificity of protein interactions are controlled by the same thermodynamic factors (shape and charge complementarity in the ground state), the selection of high affinity ligands will often also result in the selection of highly specific ligands. However, it has previously been argued that for closely related targets (such as the families of SH2 domains and other signal transduction modules) affinity-based selections may result in the ide...