The mechanism of PDGF-receptor beta (PDGFRbeta) activation was explored by analyzing the properties of mutant receptors designed based on the crystal structure of the extracellular region of the related receptor tyrosine kinase KIT/stem cell factor receptor. Here, we demonstrate that PDGF-induced activation of a PDGFRbeta mutated in Arg-385 or Glu-390 in D4 (the fourth Ig-like domain of the extracellular region) was compromised, resulting in impairment of a variety of PDGF-induced cellular responses. These experiments demonstrate that homotypic D4 interactions probably mediated by salt bridges between Arg-385 and Glu-390 play an important role in activation of PDGFRbeta and all type III receptor tyrosine kinases. We also used a chemical cross-linking agent to covalently cross-link PDGF-stimulated cells to demonstrate that a Glu390Ala mutant of PDGFRbeta undergoes typical PDGF-induced receptor dimerization. However, unlike WT PDGFR that is expressed on the surface of ligand-stimulated cells in an active state, PDGF-induced Glu390Ala dimers are inactive. Although the conserved amino acids that are required for mediating D4 homotypic interactions are crucial for PDGFRbeta activation, these interactions are dispensable for PDGFRbeta dimerization. Moreover, PDGFRbeta dimerization is necessary but not sufficient for tyrosine kinase activation.