Phosphoinositide-specific phospholipase C-␥1 (PLC-␥1) is a key enzyme that governs cellular functions such as gene transcription, secretion, proliferation, motility, and development. Here, we show that PLC-␥1 is regulated via a novel autoinhibitory mechanism involving its carboxy-terminal Src homology (SH2C) domain. Mutation of the SH2C domain tyrosine binding site led to constitutive PLC-␥1 activation. The amino-terminal split pleckstrin homology (sPHN) domain was found to regulate the accessibility of the SH2C domain. PLC-␥1 constructs with mutations in tyrosine 509 and phenylalanine 510 in the sPHN domain no longer required an intact amino-terminal Src homology (SH2N) domain or phosphorylation of tyrosine 775 or 783 for activation. These data are consistent with a model in which the SH2C domain is blocked by an intramolecular interaction(s) that is released upon cellular activation by occupancy of the SH2N domain.Phosphoinositide-specific phospholipase C-␥1 (PLC-␥1) is activated in response to ligand binding by a variety of receptors (2). PLC-␥1 hydrolyzes phosphatidylinositol 4,5-bisphosphate [PI(4,5)P 2 ], leading to the generation of the second messengers, inositol triphosphate (IP 3 ) and diacylglycerol, which release Ca 2ϩ from intracellular stores and activate Ras through the RasGRP/protein kinase C pathway, respectively (8, 13). PLC-␥1 has also been shown to play a role in the activation of NF-B (7). These pathways in turn initiate signaling cascades that culminate in cytokine production, activation of effector function, and cell proliferation (2, 5). The central role of PLC-␥1 in cellular function is further illustrated by the fact that inactivation of the PLC-␥1 gene in mice is embryonic lethal (16).Regulation of PLC-␥1 activity is complex. In quiescent cells, cytosolic sequestration of PLC-␥1 limits access to PI(4,5)P 2 in the plasma membrane. Cell stimulation induces membrane recruitment of PLC-␥1 and its tyrosine phosphorylation, essential steps in PLC-␥1 activation (2,23,36). Key components of PLC-␥ that are involved in these activation events are located within a region unique to PLC-␥ between the X and Y portions of the catalytic domain. This area is composed of two Src homology 2 (SH2) domains and an Src homology 3 (SH3) domain. The N-terminal SH2 domain (SH2N) is critical for binding to either tyrosine-phosphorylated receptor kinases or adaptor molecules that mediate PLC-␥1 relocation to the plasma membrane (6,14,25). The function of the C-terminal SH2 domain (SH2C) is less clear but is also essential for PLC-␥1 activation (1, 6, 14, 33). Interestingly, the tyrosine residues that are essential for PLC-␥1 activity (Y775 and Y783 in PLC-␥1 and Y753 and Y759 in PLC-␥2) are also located in this region (29,30).Components of the SH region not only are essential for PLC-␥1 activation but also may participate in its autoregulation. The individual X or Y elements of the catalytic domain alone are inactive. When mixed together in vitro, the hydrolytic activity of the combined X and Y elements was found...