Phospholipase activity is elevated in dividing cells. In response to growth factor stimulation, phospholipase C-gamma (PLC-gamma) binds to activated tyrosine kinase receptors via SH2 binding domains, resulting in phosphorylation of PLC-gamma and activation of its enzyme activity. These observations suggest that PLC-gamma participates in the signal transduction pathway employed by growth factors to promote mitogenesis. Consistent with this hypothesis, microinjection of purified bovine PLC-gamma into quiescent fibroblasts has been previously reported to initiate a mitogenic response [Smith et al. (1989) Proc. Natl. Acad. Sci. 86, 3659]. We have reproduced this result using recombinant rat PLC-gamma protein. Surprisingly, however, a catalytically inactive mutant of PLC-gamma, H335Q, also elicited a full mitogenic response. The capacity to induce mitogenesis by microinjection of PLC-gamma was mapped to the 'Z' domain of the protein, which contains PLC-gamma's SH2 and SH3 motifs. Inactivation of the phosphorylated tyrosine binding properties of both SH2 domains had no effect on the mitogenic activity of the Z-domain peptide. However, deletion of the SH3 domain resulted in a complete loss of activity. These results suggest that PLC-gamma's mitogenic properties do not require the enzyme's phospholipase activity, but are instead mediated by a novel pathway for mitogenic stimulation which is dependent upon an intact SH3 domain.