The Janus protein tyrosine kinases (Jaks) play critical roles in transducing growth and differentiation signals emanating from ligand-activated cytokine receptor complexes. The activation of the Jaks is hypothesized to occur as a consequence of auto- or transphosphorylation on tyrosine residues associated with ligand-induced aggregation of the receptor chains and the associated Jaks. In many kinases, regulation of catalytic activity by phosphorylation occurs on residues within the activation loop of the kinase domain. Within the Jak2 kinase domain, there is a region that has considerable sequence homology to the regulatory region of the insulin receptor and contains two tyrosines, Y1007 and Y1008, that are potential regulatory sites. In the studies presented here, we demonstrate that among a variety of sites, Y1007 and Y1008 are sites of trans- or autophosphorylation in vivo and in in vitro kinase reactions. Mutation of Y1007, or both Y1007 and Y1008, to phenylalanine essentially eliminated kinase activity, whereas mutation of Y1008 to phenylalanine had no detectable effect on kinase activity. The mutants were also examined for the ability to reconstitute erythropoietin signaling in gamma2 cells, which lack Jak2. Consistent with the kinase activity, mutation of Y1007 to phenylalanine eliminated the ability to restore signaling. Moreover, phosphorylation of a kinase-inactive mutant (K882E) was not detected, indicating that Jak2 activation during receptor aggregation is dependent on Jak2 and not another receptor-associated kinase. The results demonstrate the critical role of phosphorylation of Y1007 in Jak2 regulation and function.