We have used the neurokinin NK-2 receptor as a model to examine how receptor desensitization affects cellular responses. The liganded receptor transiently activates phospholipase C (PLC) and is rapidly phosphorylated on Ser/Thr residues in its C-terminal domain. Mutant receptors lacking this domain mediate persistent activation of PLC. We now show that, in transfected Rat-1 cells, mutant receptor mediates ligand-induced DNA synthesis, morphological transformation and growth in soft agar, whereas wild-type (wt) receptor does not. Wt receptor causes only transient MAP kinase activation. In contrast, MAP kinase activation by mutant receptor is sustained for >4 h. Neither wt nor mutant receptor couples to Ras activation. Downregulation of protein kinase C (PKC) has little effect on MAP kinase activation, DNA synthesis and transformation. Mutant receptors also promote stronger protein tyrosine phosphorylation and stress fibre formation than does wt receptor. Thus, C-terminal truncation allows the NK-2 receptor to signal sustained MAP kinase activation, cell growth and transformation by a Ras- and PKC-independent mechanism. Our results reveal the importance of the C-terminal 'desensitization domain' in suppressing the oncogenic potential of a prototypic PLC-coupled receptor.