The transforming activity of the human fyn protein, p59fyn, which is a kinase of the src family, was investigated by testing the effect of recombinant avian retrovirus (Fyn virus) expressing p59fyn on chickens or cultured chicken embryo fibroblast (CEF) cells. The Fyn virus did not induce transformed foci. After several passages of the virus stock on CEF cells, however, a few foci were detected in the presence of dimethyl sulfoxide. Chickens inoculated with Fyn virus at the stage of 12-day-old embryos developed fibrosarcomas 3 to 6 weeks after hatching. The viruses obtained from these foci and from one of the tumor tissues showed high transforming activity in the presence of dimethyl sulfoxide, suggesting that these viruses carry spontaneous mutations of the fyn gene. Four fyn genes from CEF DNAs infected with transforming viruses were molecularly cloned, and their products were confirmed to possess transforming activity. DNA sequence analysis of the fyn genes showed that two of the four mutants have Thr instead of Ile at position 338 in the kinase domain. The other two mutants carry deletions of 78 and 108 base pairs, respectively, which result in complete loss of region C of SH2. The overall level of proteins containing phosphotyrosine was significantly higher in transformed cells than in normal CEF cells. Our data indicate that when expressed at high levels in a retrovirus, normal p59fyn cannot cause cellular transformation, but that mutant p59fyn with either a single amino acid substitution in the kinase domain or a deletion including region C produces a transforming protein, perhaps due to enhanced tyrosine kinase activity. This is the first observation that deletion of region C can unmask the potential transforming activity of a src family kinase.