Src homology 2 (SH2) domains interact with proteins containing phosphorylated tyrosine residues and as such play a key role in mediating tyrosine kinase signal transduction. Determination of how these interactions maintain specificity is central to understanding the mechanism of this intracellular signal processing. In the Src family tyrosine kinases specificity is enhanced by a form of regulation based on binding of a phosphotyrosine, pY, and its proximal amino acid sequence from the C-terminus to the SH2 domain of the same protein (autoregulation) or to a similar protein (homodimeric regulation). Activation of the protein is accomplished by removal of this regulatory interaction by competition from a "specific" interacting ligand. We adopt the SH2 domain from a member of the Src family, Fyn (whose predominant physiological role is in initiation of signals from the T-cell receptor complex), to explore the differences in structural, thermodynamic, and kinetic determinants of regulatory and specific interactions using tyrosyl phosphopeptides based on the C-terminus and on a putative physiological interacting species from the hamster middle-sized tumor antigen. The specific peptide interacts with micromolar affinity via embedding the pY and an isoleucine residue (in the pY + 3 position) in two deep pockets. This leads to a large favorable enthalpic contribution to free energy. The regulatory peptide interacts in the pY pocket which forms a pivot for the rest of the molecule which is dynamic. These structural data for the regulatory peptide are supported by the observation of a more favorable entropic term and a complex mode of binding revealed by kinetic analysis.