We have shown that members of the erbB family undergo homodimer and heterodimer formation. The rat p185c-neu and the epidermal growth factor receptor (EGFR) can associate into an active heterodimeric tyrosine kinase. Overexpression of these two receptors also results in a transformed phenotype. We now show that mutant Neu proteins resulting from a point mutation at the ATP-binding site (N757) or cytoplasmic domain deletions (N691stop) are still able to undergo EGF-induced heterodimerization with EGFR. Analysis of heterodimer formation between EGFR and truncated Neu proteins revealed that heterodimerization is preferred over homodimerization of EGFR. N757 can be transphosphorylated by associated EGFR upon EGF stimulation. However, the heterodimer composed of EGFR and N691stop is kinase inactive. These results provided evidence that the Neu ectodomain is sufficient to associate with EGFR physically, and the cytoplasmic domain interaction is required for heterodimeric kinase activation, indicating that Neu/c-erbB2 is not just a simple substrate for EGFR but a transactivator as well.