The effect of mutations in the Src homology 2 (SH2) domain of the BCR/ABL oncogene on leukemogenesis was tested in a quantitative murine bone marrow transduction/transplantation assay that accurately models human Philadelphia-positive B-lymphoid leukemia and chronic myeloid leukemia (CML). The SH2 domain was not required for induction of B-lymphoid leukemia in mice by BCR/ABL. Under conditions where the p190 and p210 forms of BCR/ABL induce fatal CML-like myeloproliferative disease within 4 weeks, p210 SH2 mutants induced CML-like disease in some mice only after a significant delay, with other recipients succumbing to B-lymphoid leukemia instead. In contrast, p190 BCR/ABL SH2 point and deletion mutants rapidly induced CML-like disease. These results provide the first direct evidence of significant differences in cell signaling by the Bcr/Abl tyrosine kinase between these distinct leukemias. Contrary to previous observations, high levels of phosphatidylinositol 3-kinase (PI 3-kinase) activity in primary malignant lymphoblasts and myeloid cells from recipients of marrow transduced with the BCR/ABL SH2 mutants were found. Hence, the decreased induction of CML-like disease by the p210 BCR/ABL SH2 mutants is not due to impaired activation of PI 3-kinase.