pp60(c-src) tyrosine kinase (srcTK) catalyzes the dephosphorylation of phosphotyrosine-containing peptides, including phosphopeptides that bind with high affinity to the src SH2 domain. The mechanism for these dephosphorylation reactions was investigated. Dephosphorylation was inhibited by a competitive inhibitor for the ATP binding site. In the presence of ADP, dephosphorylation of phosphopeptide substrates is primarily due to the reversal of the kinase reaction. Autoactivated and unactivated srcTK both catalyzed the reverse of the kinase reaction; however, autoactivated srcTK displayed an increase in k(cat) of approximately 4-11-fold relative to unactivated srcTK, depending on the reaction conditions. Autoactivation of srcTK does not affect the K-m's for MgADP or phosphopeptide (FGE)(3)-pY-(GEF)(2)GD. Unphosphorylated srcTK becomes phosphorylated during the reverse of the kinase reaction upon accumulation of free MgaTP. In the presence of MgATP, srcTK also dephosphorylates peptide substrates, by first hydrolyzing MgATP to MgADP. Binding of phosphotyrosine peptide ligands to the src SH2 domain stimulated the rate of MgATP hydrolysis approximately 2-fold, but had no effect on the K-m for MgATP. These data suggest that autophosphorylation of tyrosine 419 is not required for nucleotide or peptide binding, or catalysis involving small peptide substrates. In addition, these results suggest that both the forward and the reverse src tyrosine kinase reactions may be important in regulating the intracellular levels of protein tyrosine phosphorylation.