Transforming growth factor-β (TGF-β) signaling has important roles during embryonic development and in tissue homeostasis. TGF-β ligands exert cellular effects by binding to type I (TβRI) and type II (TβRII) receptors and inducing both SMAD-dependent and SMAD-independent intracellular signaling pathways, the latter of which includes the activation of the tyrosine kinase Src. We investigated the mechanism by which TGF-β stimulation activates Src in human and mouse cells. Before TGF-β stimulation, inactive Src was complexed with TβRII. Upon TGF-β1 stimulation, TβRII associated with and phosphorylated TβRI at Tyr182. Binding of Src to TβRI involved the interaction of the Src SH2 domain with phosphorylated Tyr182 and the interaction of the Src SH3 domain with a proline-rich region in TβRI and led to the activation of Src kinase activity and Src autophosphorylation. TGF-β1-induced Src activation required the kinase activities of TβRII and Src but not that of TβRI. Activated Src also phosphorylated TβRI on several tyrosine residues, which may stabilize the binding of Src to the receptor. Src activation was required for the ability of TGF-β to induce fibronectin production and migration in human breast carcinoma cells and to induce α-smooth muscle actin and actin reorganization in mouse fibroblasts. Thus, TGF-β induces Src activation by stimulating a direct interaction with TβRI that depends on tyrosine phosphorylation of TβRI by TβRII.