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Protein kinases are attractive therapeutic targets, but their high sequence and structural conservation complicates the development of specific inhibitors. We recently identified, in a DNA-templated macrocycle library, inhibitors with unusually high selectivity among Src-family kinases. Starting from these compounds, we developed and characterized in molecular detail potent macrocyclic inhibitors of Src kinase and its cancer-associated 'gatekeeper' mutant. We solved two cocrystal structures of macrocycles bound to Src kinase. These structures reveal the molecular basis of the combined ATP- and substrate peptide-competitive inhibitory mechanism and the remarkable kinase specificity of the compounds. The most potent compounds inhibit Src activity in cultured mammalian cells. Our work establishes that macrocycles can inhibit protein kinases through a bisubstrate-competitive mechanism with high potency and exceptional specificity, reveals the precise molecular basis for their desirable properties and provides new insights into the development of Src-specific inhibitors with potential therapeutic relevance.