The C-terminal Src kinase (Csk) family of protein tyrosine kinases contains two members: Csk and Csk homologous kinase (Chk). Both phosphorylate and inactivate Src family kinases. Recent reports suggest that the Src homology (SH) 2 domains of Csk and Chk may bind to different phosphoproteins, which provides a basis for different cellular functions for Csk and Chk. To verify and characterize such a functional divergence, we compared the binding properties of the Csk, Chk, and Src SH2 domains and investigated the structural basis for the functional divergence. First, the study demonstrated striking functional differences between the Csk and Chk SH2 domains and revealed functional similarities between the Chk and Src SH2 domains. Second, structural analysis and mutagenic studies revealed that the functional differences among the three SH2 domains were largely controlled by one residue, Glu127 in Csk, Ile167 in Chk, and Lys200 in Src. Mutating these residues in the Csk or Chk SH2 domain to the Src counterpart resulted in dramatic gain of function similar to Src SH2 domain, whereas mutating Lys200 in Src SH2 domain to Glu (the Csk counterpart) resulted in loss of Src SH2 function. Third, a single point mutation of E127K rendered Csk responsive to activation by a Src SH2 domain ligand. Finally, the optimal phosphopeptide sequence for the Chk SH2 domain was determined. These results provide a compelling explanation for the functional differences between two homologous protein tyrosine kinases and reveal a new structure-function relationship for the SH2 domains.