Phosphotyrosine binding (PTB) domains of the adaptor protein Shc and insulin receptor substrate (IRS-1) interact with a distinct set of activated and tyrosine-phosphorylated cytokine and growth factor receptors and play important roles in mediating mitogenic signal transduction. By using the technique of isothermal titration calorimetry, we have studied the thermodynamics of binding of the Shc and IRS-1 PTB domains to tyrosine-phosphorylated NPXY-containing peptides derived from known receptor binding sites. The results showed that relative contributions of enthalpy and entropy to the free energy of binding are dependent on specific phosphopeptides. Binding of the Shc PTB domain to tyrosine-phosphorylated peptides from TrkA, epidermal growth factor, ErbB3, and insulin receptors is achieved via an overall entropy-driven reaction. On the other hand, recognition of the phosphopeptides of insulin and interleukin-4 receptors by the IRS-1 PTB domain is predominantly an enthalpy-driven process. Mutagenesis and amino acid substitution experiments showed that in addition to the tyrosine-phosphorylated NPXY motif, the PTB domains of Shc and IRS-1 prefer a large hydrophobic residue at pY-5 and a small hydrophobic residue at pY-1, respectively (where pY is phosphotyrosine). These results agree with the calculated solvent accessibility of these two key peptide residues in the PTB domain/peptide structures and support the notion that the PTB domains of Shc and IRS-1 employ functionally distinct mechanisms to recognize tyrosine-phosphorylated receptors.