Signaling by epidermal growth factor (EGF)-like ligands is mediated by an interactive network of four ErbB receptor tyrosine kinases, whose mechanism of ligand-induced dimerization is unknown. We contrasted two existing models: a conformation-driven activation of a receptor-intrinsic dimerization site and a ligand bivalence model. Analysis of a Neu differentiation factor (NDF)-induced heterodimer between ErbB-3 and ErbB-2 favors a bivalence model; the ligand simultaneously binds both ErbB-3 and ErbB-2, but, due to low-affinity of the second binding event, ligand bivalence drives dimerization only when the receptors are membrane anchored. Results obtained with a chimera and isoforms of NDF/neuregulin predict that each terminus of the ligand molecule contains a distinct binding site. The C-terminal low-affinity site has broad specificity, but it prefers interaction with ErbB-2, an oncogenic protein acting as a promiscuous low-affinity subunit of the three primary receptors. Thus, ligand bivalence enables signal diversification through selective recruitment of homo- and heterodimers of ErbB receptors, and it may explain oncogenicity of erbB-2/HER2.