The protein tyrosine kinase c-Src is negatively regulated by phosphorylation of Tyr527 in its carboxy-terminal tail. A kinase that phosphorylates Tyr527, called Csk, has recently been identified. We expressed c-Src in yeast to test the role of the SH2 and SH3 domains of Src in the negative regulation exerted by Tyr527 phosphorylation. Inducible expression of c-Src in Schizosaccharomyces pombe caused cell death. Co-expression of Csk counteracted this effect. Src proteins mutated in either the SH2 or SH3 domain were as lethal as wild type c-Src, but were insensitive to Csk, even though they were substrates for Csk in vivo. Peptide binding experiments revealed that Src proteins with mutant SH3 domains adopted a conformation in which the SH2 domain was not interacting with the tail. These data support the model of an SH2 domain-phosphorylated tail interaction repressing c-Src activity, but expand it to include a role for the SH3 domain. We propose that the SH3 domain contributes to the maintenance of the folded, inactive configuration of the Src molecule by stabilizing the SH2 domain-phosphorylated tail interaction. Moreover, the system we describe here allows for further study of the regulation of tyrosine kinases in a neutral background and in an organism amenable to genetic analysis.