Phosphoinositide-specific phospholipase C-gamma1 (PLC-gamma1) is a key enzyme that governs cellular functions such as gene transcription, secretion, proliferation, motility, and development. Here, we show that PLC-gamma1 is regulated via a novel autoinhibitory mechanism involving its carboxy-terminal Src homology (SH2C) domain. Mutation of the SH2C domain tyrosine binding site led to constitutive PLC-gamma1 activation. The amino-terminal split pleckstrin homology (sPHN) domain was found to regulate the accessibility of the SH2C domain. PLC-gamma1 constructs with mutations in tyrosine 509 and phenylalanine 510 in the sPHN domain no longer required an intact amino-terminal Src homology (SH2N) domain or phosphorylation of tyrosine 775 or 783 for activation. These data are consistent with a model in which the SH2C domain is blocked by an intramolecular interaction(s) that is released upon cellular activation by occupancy of the SH2N domain.