The c-ABL tyrosine kinase is activated following either the loss or mutation of its Src homology domain 3 (SH3), resulting in both increased autophosphorylation and phosphorylation of cellular substrates and cellular transformation. This suggests that the SH3 domain negatively regulates c-ABL kinase activity. For several reasons this regulation is thought to involve a cellular protein that binds to the SH3 domain. Hyperexpression of c-ABL results in an activation of its kinase, the kinase activity of purified c-ABL protein in the absence of cellular proteins is independent of either the presence or absence of a SH3 domain, and point mutations and deletions within the SH3 domain are sufficient to activate c-ABL transforming ability. To identify proteins that interact with the c-ABL SH3 domain, we screened a cDNA library by the yeast two-hybrid system, using the c-ABL SH3SH2 domains as bait. We identified a novel protein, AAP1 (ABL-associated protein 1), that associates with these c-ABL domains and fails to bind to the SH3 domain in the activated oncoprotein BCRABL. Kinase experiments demonstrated that in the presence of AAP1, the ability of c-ABL to phosphorylate either glutathione S-transferase-CRK or enolase was inhibited. In contrast, AAP1 had little effect on the phosphorylation of glutathione S-transferase-CRK by the activated ABL oncoproteins v-ABL and BCRABL. We conclude that AAP1 inhibits c-ABL tyrosine kinase activity but has little effect on the tyrosine kinase activities of oncogenic BCRABL or v-ABL protein and propose that AAP1 functions as a trans regulator of c-ABL kinase. Our data also indicate that loss of susceptibility to AAP1 regulation correlates with oncogenicity of the activated forms of c-ABL.