Following binding of platelet-derived growth factor (PDGF), the PDGF alpha receptor (alphaPDGFR) becomes tyrosine phosphorylated and associates with a number of signal transduction molecules, including phospholipase Cgamma-1 (PLCgamma-1), phosphatidylinositol 3-kinase (PI3K), the phosphotyrosine phosphatase SHP-2, Grb2, and Src. Here, we present data identifying a novel phosphorylation site in the kinase insert domain of the alphaPDGFR at tyrosine (Y) 720. We replaced this residue with phenylalanine and expressed the mutated receptor (F720) in Patch fibroblasts that do not express the alphaPDGFR. Characterization of the F720 mutant indicated that binding of two proteins, SHP-2 and Grb2, was severely impaired, whereas PLCgamma-1 and PI3K associated to wild-type levels. In addition, mutating Y720 to phenylalanine dramatically reduced PDGF-dependent tyrosine phosphorylation of SHP-2. Since Y720 was required for recruitment of two proteins, we investigated the mechanism by which these two proteins associated with the alphaPDGFR. SHP-2 bound the alphaPDGFR directly, whereas Grb2 associated indirectly, most probably via SHP-2, as Grb2 and SHP-2 coimmunoprecipitated when SHP-2 was tyrosine phosphorylated. We also compared the ability of the wild-type and F720 alphaPDGFRs to mediate a number of downstream events. Preventing the alphaPDGFR from recruiting SHP-2 and Grb2 did not compromise PDGF-AA-induced activation of Ras, initiation of DNA synthesis, or growth of cells in soft agar. We conclude that phosphorylation of the alphaPDGFR at Y720 is required for association of SHP-2 and Grb2 and tyrosine phosphorylation of SHP-2; however, these events are not required for the alphaPDGFR to activate Ras or initiate a proliferative response. In addition, these findings reveal that while SHP-2 binds to both of the receptors, it binds in different locations: to the carboxy terminus of the betaPDGFR but to the kinase insert of the alphaPDGFR.