c-Src is a non-receptor tyrosine kinase involved in numerous signal transduction pathways. The kinase,SH3 and SH2 domains of c-Src are attached to the membrane-anchoring SH4 domain through the flexible Unique domain. Here we show intra- and intermolecular interactions involving the Unique and SH3 domains suggesting the presence of a previously unrecognized additional regulation layer in c-Src. We have characterized lipid binding by the Unique and SH3 domains, their intramolecular interaction and its allosteric modulation by a SH3-binding peptide or by Calcium-loaded calmodulin binding to the Unique domain. We also show reduced lipid binding following phosphorylation at conserved sites of the Unique domain. Finally, we show that injection of full-length c-Src with mutations that abolish lipid binding by the Unique domain causes a strong in vivo phenotype distinct from that of wild-type c-Src in a Xenopus oocyte model system, confirming the functional role of the Unique domain in c-Src regulation.