Background: Activated receptor tyrosine kinases bind downstream effector molecules with high affinity. Provided that they can be introduced into cells, peptides corresponding to these high-affinity sites should be able to compete for the interaction and thereby inhibit specific signal transduction cascades. The high-affinity binding site for phospholipase C gamma (PLC gamma) on the activated fibroblast growth factor receptor (FGFR) is centred around the tyrosine at position 766 ((766)Tyr), and peptides corresponding to this site inhibit PLC gamma binding to the receptor in vitro. A 16 amino-acid peptide from the third helix of the Antennapedia homeodomain protein has recently been shown to be able to act as an internalization vector that can deliver other peptides into cells. Here, we have designed a peptide that contains both the internalization sequence and the FGFR high-affinity binding site for PLC gamma, and tested it in cultures of cerebellar neurons for its ability to inhibit the activation of PLC gamma by basic FGF. Results: The peptide containing the FGFR high-affinity binding site for PLC gamma inhibited phospholipid hydrolysis stimulated by basic FGF with a maximal effect at 1 mu g ml(-1). Phosphorylation of (766)Tyr was required for this effect. The phosphorylated peptide had no effect on phospholipid hydrolysis stimulated by platelet-derived growth factor, neurotrophin-3 and bradykinin. The phosphorylated peptide also inhibited neurite outgrowth stimulated by FGF, but had no effect on neurite outgrowth stimulated by agents that activate the FGFR signal transduction cascade downstream from the activation of PLC gamma. Conclusions: Cell-permeable peptides can be designed that inhibit the function of receptor tyrosine kinases. In this context we have developed a peptide that prevents the FGFR from activating PLC gamma, and have used this peptide to obtain the first direct evidence that activation of PLC gamma is required for the neurite outgrowth response stimulated by basic FGF.