We have shown a novel mechanism of Akt-mediated regulation of the CDK inhibitor p27(kip1). Blockade of HER2/neu in tumor cells inhibits Akt kinase activity and upregulates nuclear levels of the CDK inhibitor (Kip1). Recombinant Akt and Akt precipitated from tumor cells phosphorylated wild-type p27 in vitro. p27 contains an Akt consensus RXRXXT(157)D within its nuclear localization motif. Active (myristoylated) Akt phosphorylated wild-type p27 in vivo but was unable to phosphorylate a T157A-p27 mutant. Wild-type p27 localized in the cytosol and nucleus, whereas T157A-p27 localized exclusively in the nucleus and was resistant to nuclear exclusion by Akt. T157A-p27 was more effective than wild-type p27 in inhibiting cyclin E/CDK2 activity and cell proliferation; these effects were not rescued by active Akt. Expression of Ser(473) phospho Akt in primary human breast cancers statistically correlated with expression of p27 in tumor cytosol. These data indicate that Akt may contribute to tumor-cell proliferation by phosphorylation and cytosolic retention of p27, thus relieving CDK2 from p27-induced inhibition.