Phosphorylation of pp60c-src at Tyr-527, six residues from the carboxy terminus, has been implicated in regulation of the protein-tyrosine kinase activity of pp60c-src. Here we show that dephosphorylation of pp60c-src by phosphatase treatment in vitro caused a 10- to 20-fold increase in pp60c-src protein-tyrosine kinase activity. Binding of specific antibody to the region of pp60c-src which contains phosphotyrosine-527 also increased kinase activity. Each treatment increased phosphorylation of added substrates and of Tyr-416 within pp60c-src by a similar mechanism that involved altered interactions with ATP and increased catalytic rate. We suggest that the phosphorylated carboxy terminus acts as an inhibitor of the protein kinase domain of pp60c-src, unless its conformation is altered by either dephosphorylation or antibody binding. The antibody additionally stimulated the phosphorylation of forms of pp60c-src that had reduced gel mobility, much like those phosphorylated in kinase reactions containing pp60c-src activated by polyomavirus medium tumor antigen. These in vitro experiments provide models for the activation of pp60c-src in cells transformed by polyomavirus. We also show that autophosphorylation of pp60c-src at Tyr-527 occurs only to a very limited extent in vitro, even when Tyr-527 is made available for phosphorylation by treatment with phosphatase. This suggests that other protein-tyrosine kinases may normally phosphorylate Tyr-527 and regulate pp60c-src in the cell.