The BCR/ABL oncogenic tyrosine kinase activates phosphatidylinositol 3-kinase (PI-3k) by a mechanism that requires binding of BCR/ABL to p85, the regulatory subunit of PI-3k, and an intact BCR/ABL SH2 domain. SH2 domain BCR/ABL mutants deficient in PI-3k activation failed to stimulate Akt kinase, a recently identified PI-3k downstream effector with oncogenic potential, but did activate p21 RAS and p70 S6 kinase. The PI-3k/Akt pathway is essential for BCR/ABL leukemogenesis as indicated by experiments demonstrating that wortmannin, a PI-3k specific inhibitor at low concentrations, suppressed BCR/ABL-dependent colony formation of murine marrow cells, and that a kinase-deficient Akt mutant with dominant-negative activity inhibited BCR/ABL-dependent transformation of murine bone marrow cells in vitro and suppressed leukemia development in SCID mice. In complementation assays using mouse marrow progenitor cells, the ability of transformation-defective SH2 domain BCR/ABL mutants to induce growth factor-independent colony formation and leukemia in SCID mice was markedly enhanced by expression of constitutively active Akt. In retrovirally infected mouse marrow cells, the BCR/ABL mutant lacking the SH2 domain was unable to upregulate the expression of c-Myc and Bcl-2; in contrast, expression of a constitutively active Akt mutant induced Bcl-2 and c-Myc expression, and stimulated the transcription activation function of c-Myc. Together, these data demonstrate the requirement for the BCR/ABL SH2 domain in PI-3k activation and document the essential role of the PI-Sk/Akt pathway in BCR/ABL leukemogenesis.