p185c-neu and epidermal growth factor receptor (EGFR) associate into an active heterodimer, and overexpression of these two receptors leads to a transformed phenotype. However, the association of EGFR and kinase-deficient Neu proteins (point mutant N757 or cytoplasmic domain deletion mutant N691stop) results in a defective or inactive heterodimeric complex. In this report we explore the biological consequences of heterodimerization between EGFR and wild-type (WT) or kinase-deficient mutant Neu proteins in living cells. We show that co-expression of EGFR and kinase-deficient Neu proteins abolished the synergistic transformation and tumorigenicity. Moreover, the normal responses of EGFR to ligand were significantly suppressed, e.g., loss of EGF-dependent transformation, reduced rate of receptor endocytosis and turnover, diminished DNA synthesis, and decreased EGF binding affinity. These results provide the first evidence that kinase-deficient Neu proteins suppress normal EGFR function and display a dominant negative mutant phenotype. Together with the stimulatory effects observed in cells forming active heterodimers, these studies provide a role for heterodimerization of EGFR and Neu/c-erbB2 in interreceptor activation and synergistic signaling which may be responsible for the transition from normal receptor function into oncogenesis.