The Rous sarcoma virus (RSV) transforming gene product has been identified and characterized as a phosphoprotein with a molecular weight of 60,000, denoted pp60src. Partially purified pp60src displays a closely associated phosphotransferase activity with the unusual specificity of phosphorylating tyrosine residues in a variety of proteins. That the enzymatic activity observed is actually encoded by the RSV-transforming gene is indicated by the comparison of the pp60src-protein kinase isolated from cells tranformed by a wild-type RSV or by a RSV temperature-sensitive transformation mutant; these experiments revealed that the latter enzyme had a half-life of 3 min at 41 degrees C, whereas that of the wild-type enzyme was 20 min. Evidence is now beginning to accumulate showing that viral pp60src expresses its protein kinase activity in transformed cells as well as in vitro because at least one cellular protein has been identified as a substrate for this activity of pp60src. Although the protein kinase activity associated with pp60src is itself cyclic AMP (cAMP) independent, the molecule contains at least one serine residue that is directly phosphorylated by the cellular cAMP-dependent protein kinase, thus suggesting that the viral transforming gene product may be regulated indirectly by the level of cAMP. The significance of this latter observation must be regarded from the point of view that the RSV src gene is apparently derived from a normal cellular gene that seemingly expresses in normal uninfected cells a phosphoprotein structurally and functionally closely related to pp60src. This celluar protein, found in all vertebrate species tested, also is a substrate for a cAMP-dependent protein kinase of normal cells, and, therefore, may be evolved to function in a regulatory circuit involving cAMP.