Discoidin domain receptor 2 (DDR2) is an unusual receptor tyrosine kinase in that its ligand is fibrillar collagen rather than a growth factor-like peptide. We examined signal transduction pathways of DDR2. Here we show that DDR2 is also unusual in that it requires Src activity to be maximally tyrosine-phosphorylated, and that Src activity also promotes association of DDR2 with Shc. The interaction with Shc involves a portion of Shc not previously implicated in interaction with receptor tyrosine kinases. These results identify Src kinase and the adaptor protein Shc as key signaling intermediates in DDR2 signal transduction. Furthermore, Src is required for DDR2-mediated transactivation of the matrix metalloproteinase-2 promoter. The data support a model in which Src and the DDR2 receptor cooperate in a regulated fashion to direct the phosphorylation of both the receptor and its targets.