The phosphotyrosine-binding (PTB) domain of Drosophila Shc (dShc) binds in vitro to phosphopeptides containing the sequence motif NPXpY, and physically associates with the activated Drosophila epidermal growth factor receptor homologue (DER) in vivo. The structural elements, specificity and binding kinetics of the dShc PTB domain have now been characterized. The dShc PTB domain appeared similar to the insulin-like receptor substrate-1 PTB domain in secondary structure as suggested by Fourier transform infrared spectroscopy. Surface plasmon resonance measurements indicated that the dShc PTB domain bound with high affinity to phosphopeptides (Der) derived from the Tyr1228 site of the DER receptor. The kinetics of the dShc PTB domain-Der phosphopeptide interaction differed from those of a typical SH2 domain-ligand interaction, in that the PTB domain displayed slower on/off rates. Competition binding assays using truncated versions of the Der peptides revealed that high affinity binding to the dShc PTB domain requires, in addition to the NPXpY motif, the presence of hydrophobic residues at both positions -5 and -7 relative to phosphotyrosine. The dShc PTB domain showed a similar binding specificity to the human Shc (hShc) PTB domain, but subtle differences were noted; such that the hShc PTB domain bound preferentially to a phosphopeptide from the mammalian nerve growth factor receptor, whereas the dShc PTB domain bound preferentially to phosphopeptides from the Drosophila DER receptor. The invertebrate dShc PTB domain therefore possesses a binding specificity for tyrosine-phosphorylated peptides that is optimally suited for recognition of the activated DER receptor.