Transmembrane receptors typically transmit cellular signals following growth factor stimulation by coupling to and activating downstream signaling cascades. Reports of proteolytic processing of cell surface receptors to release an intracellular domain (ICD) has raised the possibility of novel signaling mechanisms directly mediated by the receptor ICD. The receptor tyrosine kinase ERBB4/HER4 (referred to here as ERBB4) undergoes sequential processing by tumor necrosis factor-alpha converting enzyme and presenilin-dependent gamma-secretase to release the ERBB4 ICD (4ICD). Our recent data suggests that regulation of gene expression by the ERBB4 nuclear protein and the proapoptotic activity of ERBB4 involves the gamma-secretase release of 4ICD. To determine the role gamma-secretase processing plays in ERBB4 signaling, we generated an ERBB4 allele with the transmembrane residue substitution V673I (ERBB4-V673I). We demonstrate that ERBB4-V673I fails to undergo processing by gamma-secretase but retains normal cell surface signaling activity. In contrast to wild-type ERBB4, however, ERBB4-V673I was excluded from the nuclei of transfected cells and failed to activate STAT5A stimulation of the beta-casein promoter. These results support the contention that gamma-secretase processing of ERBB4 is necessary to release a functional 4ICD nuclear protein which directly regulates gene expression. We also demonstrate that 4ICD failed to accumulate within mitochondria of ERBB4-V673I transfected cells and the potent proapoptotic activity of ERBB4 was completely abolished in cells expressing ERBB4-V673I. Our results provide the first formal demonstration that proteolytic processing of ERBB4 is a critical event regulating multiple receptor signaling activities.