Overexpression of Neu (ErbB-2/HER2) is found in ~20% of breast tumors. Activation of Neu by a point mutation (Neu(T)) causes constitutive tyrosine kinase activity of this transmembrane receptor and transforming activity in fibroblasts. To identify downstream targets of Neu, we have analyzed the ability of Neu to activate gene expression. Expression of Neu(T), but not normal Neu, caused transcriptional activation of Ets, AP-1, or NF-κB- dependent reporter genes. Dominant inhibitory Ras or Raf mutants blocked the Neu-mediated transcriptional activation, confirming that Ras signaling pathways were required for this activation. Analysis with Ets2 mutants indicated that activation of Ets2 transcriptional activity mediated by Neu(T) or oncogenic Ras required phosphorylation of the same Ets2 residue, threonine 72. Cotransfection of dominant inhibitory Ets2 mutants specifically blocked Neu(T)-mediated activation of Ets-dependent reporter genes. Furthermore, in focus formation assays using NIH 3T3 cells, the transforming activity of Neu(T) was inhibited 5-fold when Neu(T) was cotransfected with a dominant negative Ets2 mutant. However, parallel colony formation assays showed that the Ets2 dominant negative mutant did not inhibit the growth of normal cells. Together, these data show that Neu(T) activates a variety of transcription factor families via the Ras signaling pathway and that Ets activation is required for Neu(T)-mediated cellular transformation. Thus, downstream targets of Neu, including Ets transcription factors, may be useful points for therapeutic intervention in Neu/ErbB-2-associated cancers.