Deregulation of cell cycle checkpoints is an almost universal abnormality in human cancers and is most often due to loss-of-function mutations of tumor suppressor genes such as Rb, p53, or p16(INK4a). In this study, we demonstrate that BCR/ABL inhibits the expression of a key cell cycle inhibitor, p27(Kip1), by signaling through a pathway involving phosphatidylinositol 3-kinase (PI3K). p27(Kip1) is a widely expressed inhibitor of cdk2, an essential cell cycle kinase regulating entry into S phase. We demonstrate that the decrease of p27(Kip1) is directly due to BCR/ABL in hematopoietic cells by two different approaches. First, induction of BCR/ABL by a tetracycline-regulated promoter is associated with a reversible down-regulation of p27(Kip1). Second, inhibition of BCR/ABL kinase activity with the Abl tyrosine kinase inhibitor STI571 rapidly increases p27(Kip1) levels. The PI3K inhibitor LY-294002 blocks the ability of BCR/ABL to induce p27(Kip1) down-regulation and inhibits BCR/ABL-induced entry into S phase. The serine/threonine kinase AKT/protein kinase B is a known downstream target of PI3K. Transient expression of an activated mutant of AKT was found to decrease expression of p27(Kip1), even when PI3K was inhibited by LY-294002. The mechanism of p27(Kip1) regulation is primarily related to protein stability, since inhibition of proteasome activity increased p27(Kip1) levels in BCR/ABL-transformed cells, whereas very little change in p27 transcription was found. Overall, these data are consistent with a model in which BCR/ABL suppresses p27(Kip1) protein levels through PI3K/AKT, leading to accelerated entry into S phase. This activity is likely to explain in part previous studies showing that activation of PI3K was required for optimum transformation of hematopoietic cells by BCR/ABL in vitro and in vivo.