The 44 amino acid E5 transmembrane protein is the primary oncogene product of bovine papillomavirus. Homodimers of the E5 protein activate the cellular PDGF beta receptor tyrosine kinase by binding to its transmembrane domain and inducing receptor dimerization, resulting in cellular transformation. To investigate the role of transmembrane hydrophilic amino acids in receptor activation, we constructed a library of dimeric small transmembrane proteins in which 16 transmembrane amino acids of the E5 protein were replaced with random, predominantly hydrophobic amino acids. A low level of hydrophilic amino acids was encoded at each of the randomized positions, including position 17, which is an essential glutamine in the wild-type E5 protein. Library proteins that induced transformation in mouse C127 cells stably bound and activated the PDGF beta receptor. Strikingly, 35% of the transforming clones had a hydrophilic amino acid at position 17, highlighting the importance of this position in activation of the PDGF beta receptor. Hydrophilic amino acids in other transforming proteins were found adjacent to position 17 or at position 14 or 21, which are in the E5 homodimer interface. Approximately 22% of the transforming proteins lacked hydrophilic amino acids. The hydrophilic amino acids in the transforming clones appear to be important for driving homodimerization, binding to the PDGF beta receptor, or both. Interestingly, several of the library proteins bound and activated PDGF beta receptor transmembrane mutants that were not activated by the wild-type E5 protein. These experiments identified transmembrane proteins that activate the PDGF beta receptor and revealed the importance of hydrophilic amino acids at specific positions in the transmembrane sequence. Our identification of transformation-competent transmembrane proteins with altered specificity suggests that this approach may allow the creation and identification of transmembrane proteins that modulate the activity of a variety of receptor tyrosine kinases.