FGF signaling is clearly important for proper bone development, and several autosomally dominant forms of genetic bone disorders have been mapped to FGF receptors 1, 2, and 3. We have studied the biological effects of the most commonly mutated cysteine residue in FGFR-2 which is detected in individuals with Crouzon syndrome, an autosomally dominant trait which causes premature fusion of the skull bones (craniosynostosis). This Crouzon mutation replaces the cysteine at position 342 with tyrosine, thus disrupting the formation of the third immunoglobulin (Ig)-like loop in the extracellular portion of the receptor. By transfecting mutated and wild-type receptors into a variety of cell lines, we have shown that the C342Y mutation in FGFR-2 produces a receptor which is constitutively activated and capable of transforming NIH3T3 cells and preventing the differentiation of C2 myoblasts in the absence of ligand. Constitutive activation appears to result from the ability of this receptor to form stable interreceptor dimers which involve disulfide bonds between the remaining free cysteine in the mutant receptor. The altered conformation of the third Ig-like domain in the mutated receptor also results in a drastically reduced ability to bind FGF-1 or FGF-2 and in a reduced level of receptor glycosylation. Thus it appears that Crouzon syndrome results from constitutive activation of FGFR-2 and that uncontrolled FGF signaling produces alterations of intramembranous bone development and premature closing of cranial sutures.