The erbB oncogene encodes an altered form of the epidermal growth factor (EGF) receptor that lacks the extracellular ligand binding domain. This oncogene is exclusively leukemogenic. However, an increase in oncogenic potential and a broadening of the tissue specificity of tumor formation occurs after retroviral transduction of erbB. The increased oncogenic potential correlates with structural alterations within the erbB gene. One common event is the deletion of a serine phosphorylation site located within the COOH-terminal domain. This site of phosphorylation has been demonstrated to be required for EGF-induced desensitization of signaling by the EGF receptor (Countaway, J. L., Nairn, A. C., and Davis, R.J. (1992) J. Biol. Chem. 267, 1129-1140). Here we show that the mutation of erbB at this negative regulatory serine phosphorylation site causes fibroblast transformation in vitro and is associated with an increased oncogenic potential in vivo.