Src, a nonreceptor tyrosine kinase, is an important regulator of osteoclast-mediated resorption. We have investigated whether compounds that bind to the Src SH2 domain inhibit Src activity in cells and decrease osteoclast-mediated resorption. Compounds were examined for binding to the Src SH2 domain in vitro using a fluorescence polarization binding assay. Experiments were carried out with compounds demonstrating in vitro binding activity (nmol/L range) to determine if they inhibit Src SH2 binding and Src function in cells, demonstrate blockade of Src signaling, and lack cellular toxicity. Cell-based assays included: (1) a mammalian two-hybrid assay; (2) morphological reversion and growth inhibition of cSrcY527F-transformed cells; and (3) inhibition of cortactin phosphorylation in csk−/− cells. The Src SH2 binding compounds inhibit Src activity in all three of these mechanism-based assays. The compounds described were synthesized to contain nonhydrolyzable phosphotyrosine mimics that bind to bone. These compounds were further tested and found to inhibit rabbit osteoclast-mediated resorption of dentine. These results indicate that compounds that bind to the Src SH2 domain can inhibit Src activity in cells and inhibit osteoclast-mediated resorption.