SH2 domains and SH3 domains, found in a number of protein-tyrosine kinases and substrates of protein-tyrosine kinases, provide specificity in downstream signaling. Both of these domains bind to relatively short linear sequences of peptides to provide specific interactions between proteins. The SH2 domains directly bind to phosphotyrosine residues of proteins in a specific sequence context. We have devised a phosphopeptide library technique that allows us to rapidly determine the sequence specificity of individual SH2 domains on the basis of amino acids selected at position +1, +2 and +3 C-terminal of the phosphotyrosine. The optimal motif for 22 distinct SH2 domains has been determined and used to predict likely sites of in vivo interaction. A second phosphopeptide library was devised in which the amino acids N-terminal of the phosphotyrosine were also varied. The residues N-terminal of phosphotyrosine had little influence on binding to the N-SH2 domain of the 85 kDa subunit of phosphoinositide 3-kinase. These results indicate that for this SH2 domain, specificity is determined by sequences carboxy-terminal of the phosphotyrosine moiety. Knowledge of the specificity of SH2 domains allows predictions about likely downstream targets on the basis of primary sequence of proteins. Some of these predictions will be discussed.