Receptor tyrosine kinases of the EPH class have been implicated in the control of axon guidance and fasciculation, in regulating cell migration, and in defining compartments in the developing embryo. Efficient activation of EPH receptors generally requires that their ligands be anchored to the cell surface, either through a transmembrane (TM) region or a glycosyl phosphatidylinositol (GPI) group. These observations have suggested that EPH receptors can transduce signals initiated by direct cell-cell interaction. Genetic analysis of Nuk, a murine EPH receptor that binds TM ligands, has raised the possibility that these ligands might themselves have a signalling function. Consistent with this, the three known TM ligands have a highly conserved cytoplasmic region, with multiple potential sites for tyrosine phosphorylation. Here we show that challenging cells that express the TM ligands Elk-L or Htk-L with the clustered ectodomain of Nuk induces phosphorylation of the ligands on tyrosine, a process that can be mimicked both in vitro and in vivo by an activated Src tyrosine kinase. Co-culture of cells expressing a TM ligand with cells expressing Nuk leads to tyrosine phosphorylation of both the ligand and Nuk. These results suggest that the TM ligands are associated with a tyrosine kinase, and are inducibly phosphorylated upon binding Nuk, in a fashion reminiscent of cytokine receptors. Furthermore, we show that TM ligands, as well as Nuk, are phosphorylated on tyrosine in mouse embryos, indicating that this is a physiological process. EPH receptors and their TM ligands therefore mediate bidirectional cell signalling.