Src homology 2 (SH2) domains are found in many intercellular signal-transduction proteins which bind phosphotyrosine containing polypeptide sequences with high affinity and specificity and are considered potential targets for drug discovery. The protein p56 lck is a member of the family of Src tyrosine kinase. The SH2 domain is thought to be responsible for the recruitment and regulation of p56 lck kinase activity. There have been enormous efforts in the development of SH2 domain inhibitors for diseases such as cancer, osteoporosis and other diseases. This review focuses on current understanding of SH2 domain structure, mechanism and drug discovery with an emphasis on p56 lck SH2 domain. A potential impact of the accumulated crystallographic effort on the development of methods for structure-based drug design is briefly addressed.