Phospholipase C-γ1 (PLC-γ1), an isozyme of the phosphoinositide-specific phospholipase C family, which occupies a central role in hormonal signal transduction pathways, is an excellent substrate for the epidermal growth factor (EGF) receptor tyrosine kinase. Epidermal growth factor elicits tyrosine phosphorylation of PLC-γ1 and phosphatidylinositol 4,5-bisphosphate hydrolysis in various cell lines. The ability of tyrosine phosphorylation to activate the catalytic activity of PLC-γ1 was tested. Tyrosine phosphorylation in intact cells or in vitro increased the catalytic activity of PLC-γ1. Also, treatment of EGF-activated PLC-γ1 with a tyrosine-specific phosphatase substantially decreased the catalytic activity of PLC-γ1. These results suggest that the EGF-stimulated formation of inositol 1,4,5-trisphosphate and diacylglycerol in intact cells results, at least in part, from catalytic activation of PLC-γ1 through tyrosine phosphorylation.