We show that two commonly occurring epidermal growth factor receptor (EGFR) somatic mutations, L858R and an in-frame deletion mutant, Del(746-750), exhibit distinct enzymatic properties relative to wild-type EGFR and are differentially sensitive to erlotinib. Kinetic analysis of the purified intracellular domains of EGFR L858R and EGFR Del(746-750) reveals that both mutants are active but exhibit a higher K(M) for ATP and a lower K(i) for erlotinib relative to wild-type receptor. When expressed in NR6 cells, a cell line that does not express EGFR or other ErbB receptors, both mutations are ligand dependent for receptor activation, can activate downstream EGFR signaling pathways, and promote cell cycle progression. As expected from the kinetic analysis, the EGFR Del(746-752) is more sensitive to erlotinib inhibition than the EGFR L858R mutant. Further characterization shows that these mutations promote ligand-dependent and anchorage-independent growth, and cells harboring these mutant receptors form tumors in immunocompromised mice. Analysis of tumor lysates reveals that the tumorigenicity of the mutant EGFR cell lines may be due to a differential pattern of mutant EGFR autophosphorylation as compared with wild-type receptor. Significant inhibition of tumor growth, in mice harboring wild-type EGFR receptors, is only observed at doses of erlotinib approaching the maximum tolerated dose for the mouse. In contrast, the growth of mutant tumors is inhibited by erlotinib treatment at approximately one third the maximum tolerated dose. These findings suggest that EGFR somatic mutations directly influence both erlotinib sensitivity and cellular transformation.