The acutely-transforming avian virus, Rous sarcoma virus, arose as the result of the transduction of the c-src gene of the chicken by a relatively benign avian leucosis virus. In the viral genome, the src gene is expressed in the form of a 60 kDa phosphoprotein, pp60v-src, which is a protein-tyrosine kinase. Cellular transformation results from the excessive or chronic phosphorylation of cellular proteins by pp60v-src. The c-src gene has been present in the genome of eukaryotes, at least since the evolutionary emergence of Drosophila. Like its viral descendant, it encodes a 60 kDa protein-tyrosine kinase, termed pp60c-src. Both pp60v-src and pp60c-src are bound to membranes. pp60c-src is expressed at low levels in most cell types but it is found in high amounts in neural tissues and in platelets. pp60c-src might therefore participate in vesicle-mediated secretion. pp60c-src is less active as a protein-tyrosine kinase then pp60v-src and does not induce cellular transformation, even when expressed at levels comparable to those of pp60v-src. The potency of pp60v-src apparently results from the fact that the region of the c-src gene encoding the C terminus of pp60c-src was lost during the genesis of the v-src gene. This region of pp60c-src contains a site of tyrosine phosphorylation whose occupancy apparently leads to diminished enzymatic activity. The deletion of this site may abolish the normal regulation of the protein kinase activity. If so, transformation could simply be the consequence of the inability of the cell to regulate the activity of pp60v-src.