Src functions depend on its association with the plasma membrane and with specific membrane-associated assemblies. Many aspects of these interactions are unclear. We investigated the functions of kinase, SH2, and SH3 domains in Src membrane interactions. We used FRAP beam-size analysis in live cells expressing a series of c-Src-GFP proteins with targeted mutations in specific domains together with biochemical experiments to determine whether the mutants can generate and bind to phosphotyrosyl proteins. Wild-type Src displays lipid-like membrane association, whereas constitutively active Src-Y527F interacts transiently with slower-diffusing membrane-associated proteins. These interactions require Src kinase activity and SH2 binding, but not SH3 binding. Furthermore, overexpression of paxillin, an Src substrate with a high cytoplasmic population, competes with membrane phosphotyrosyl protein targets for binding to activated Src. Our observations indicate that the interactions of Src with lipid and protein targets are dynamic and that the kinase and SH2 domain cooperate in the membrane targeting of Src.