The first 10 residues within the Src homology domain (SH)-4 domain of the Src family kinase Fyn are required for binding to the immune receptor tyrosine-based activation motif (ITAM) of T cell receptor (TCR) subunits. Recently, mutation of glycine 2, cysteine 3, and lysines 7 and 9 was shown to block binding of Fyn to TCR zeta chain ITAMs, prompting the designation of these residues as an ITAM recognition motif (Gauen, L.K.T., M.E. Linder, and A.S. Shaw. 1996. J. Cell Biol. 133:1007-1015). Here we show that these residues do not mediate direct interactions with TCR ITAMs, but rather are required for efficient myristoylation and palmitoylation of Fyn. Specifically, coexpression of a K7,9A-Fyn mutant with N-myristoyltransferase restored myristoylation, membrane binding, and association with the cytoplasmic tail of TCR zeta fused to CD8. Conversely, treatment of cells with 2-hydroxymyristate, a myristoylation inhibitor, blocked association of wild-type Fyn with zeta. The Fyn NH2 terminus was necessary but not sufficient for interaction with zeta and both Fyn kinase and SH2 domains were required, directing phosphorylation of zeta ITAM tyrosines and binding to zeta ITAM phosphotyrosines. Fyn/zeta interaction was sensitive to octylglucoside and filipin, agents that disrupt membrane rafts. Moreover, a plasma membrane bound, farnesylated Fyn construct, G2A,C3S-FynKRas, was not enriched in the detergent insoluble fraction and did not associate with zeta. We conclude that the Fyn SH4 domain provides the signals for fatty acylation and specific plasma membrane localization, stabilizing the interactions between the Fyn SH2 domain and phosphotyrosines in TCR zeta chain ITAMs.