The neu protooncogene encodes a receptor tyrosine kinase homologous to the receptor for the epidermal growth factor. The oncogenic potential of neu is released upon chemical carcinogenesis, which replaces a glutamic acid for a valine residue, within the single transmembrane domain. This results in constitutive receptor dimerization and activation of the intrinsic catalytic function. To study the implications of the oncogenic mutation and the consequent receptor dimerization on the interaction with the yet incompletely characterized ligand of p185neu, we constructed chimeric proteins between the ligand binding domain of the epidermal growth factor receptor and the transmembrane and cytoplasmic domains of the normal or the transforming Neu proteins. The chimeric receptors displayed cellular and biochemical differences characteristic of the normal and the transforming Neu proteins and therefore may reliably represent the ligand binding functions of the two receptor forms. Analyses of ligand binding revealed qualitative and quantitative differences that were a result of the single mutation; whereas the normal chimera (valine version) displayed two populations of binding sites with approximately 90% of the receptors in the low affinity state, the transforming receptor (glutamic acid version) showed a single population of binding sites with relatively high affinity. Kinetics measurements indicated that the difference in affinities was because of slower rates of both ligand association and ligand dissociation from the constitutively dimerized mutant receptor. It therefore appears that the oncogenic mutation, by permanently dimerizing the receptor, establishes a high affinity ligand binding state which is functionally equivalent to the ligand-occupied normal receptor. Our conclusion is further supported by the rates of endocytosis of the wild-type and the mutant receptor. Hence, these results provide the first experimental evidence from living cells which supports a model that attributes the heterogeneity of ligand binding sites to the state of oligomerization of receptor tyrosine kinases.