The yeast TOR2 gene encodes an essential 282 kd phosphatidylinositol (PI) 3-kinase homolog. TOR2 is related to the catalytic subunit of bovine PI 3-kinase and to yeast VPS34, a vacuolar sorting protein also shown to have PI 3-kinase activity. The immunosuppressant rapamycin most likely acts by inhibiting PI kinase activity because TOR2 mutations confer resistance to rapamycin and because a TOR1 TOR2 double disruption (TOR1 is a nonessential TOR2 homolog) confers G1 arrest, as does rapamycin. Our results further suggest that 3-phosphorylated phosphoinositides, whose physiological significance has not been determined, are an important signal in cell cycle activation. In yeast, this signal may act in a signal transduction pathway similar to the interleukin-2 signal transduction pathway in T cells.