Activating mutations in the αC-β4 loop of the ERBB2 kinase domain, such as ERBB2(YVMA) and ERBB2(G776VC), have been identified in human lung cancers and found to drive tumor formation. Here we observe that the docking protein GAB1 is hyper-phosphorylated in carcinomas from transgenic mice and in cell lines expressing these ERBB2 cancer mutants. Using dominant negative GAB1 mutants lacking canonical tyrosine residues for SHP2 and PI3K interactions or lentiviral shRNA that targets GAB1, we demonstrate that GAB1 phosphorylation is required for ERBB2 mutant-induced cell signaling, cell transformation, and tumorigenesis. An enzyme kinetic analysis comparing ERBB2(YVMA) to wild type using physiologically relevant peptide substrates reveals that ERBB2(YVMA) kinase adopts a striking preference for GAB1 phosphorylation sites as evidenced by ∼150-fold increases in the specificity constants (kcat/Km) for several GAB1 peptides, and this change in substrate selectivity was predominantly attributed to the peptide binding affinities as reflected by the apparent Km values. Furthermore, we demonstrate that ERBB2(YVMA) phosphorylates GAB1 protein ∼70-fold faster than wild type ERBB2 in vitro. Notably, the mutation does not significantly alter the Km for ATP or sensitivity to lapatinib, suggesting that, unlike EGFR lung cancer mutants, the ATP binding cleft of the kinase is not significantly changed. Taken together, our results indicate that the acquired substrate preference for GAB1 is critical for the ERBB2 mutant-induced oncogenesis.