PDGF binding to its receptor promotes the association with and stimulates the phosphorylation of PLC-gamma 1 at tyrosine and serine residues. Also, PDGF induces an increase in the hydrolysis of inositol phospholipids by PLC. How PDGF activates PLC was investigated by substituting phenylalanine for tyrosine at PLC-gamma 1 phosphorylation sites 771, 783, and 1254 and expressing the mutant enzymes in NIH 3T3 cells. Phenylalanine substitution at Tyr-783 completely blocked the activation of PLC by PDGF, whereas mutation at Try-1254 inhibited and mutation at Tyr-771 enhanced the response. Like the wild type, PLC-gamma 1 substituted with phenylalanine at Tyr-783 became associated with the PDGF receptor and underwent phosphorylation at serine residues in response to PDGF. These results suggest that PLC-gamma 1 is the PLC isozyme that mediates PDGF-induced inositol phospholipid hydrolysis, that phosphorylation on Tyr-783 is essential for PLC-gamma 1 activation. These results provide direct evidence that growth factor receptors activate the function of intracellular protein by tyrosine phosphorylation.