The kinase activity of c-Src is normally repressed in vertebrate cells by extensive phosphorylation of Y-527. C-terminal Src kinase (CSK) is a candidate for the enzyme that catalyzes this phosphorylation. We have used budding yeast to study the regulation of c-Src activity by CSK in intact cells. Expression of c-Src in Saccharomyces cerevisiae, which lacks endogenous c-Src and Y-527 kinases, induces a kinase-dependent growth inhibition. Coexpression of CSK in these cells results in phosphorylation of c-Src on Y-527 and suppression of the c-Src phenotype. CSK does not fully suppress the activity of c-Src mutants lacking portions of the SH2 or SH3 domains, even though these mutant proteins are phosphorylated on Y-527 by CSK both in vivo and in vitro. These results suggest that both the SH2 and SH3 domains of c-Src are required for the suppression of c-Src activity by Y-527 phosphorylation.