p27 mediates Cdk2 inhibition and is also found in cyclin D1-Cdk4 complexes. The present data support a role for p27 in the assembly of D-type cyclin-Cdk complexes and indicate that both cyclin D1-Cdk4-p27 assembly and kinase activation are regulated by p27 phosphorylation. Prior work showed that p27 can be phosphorylated by protein kinase B/Akt (PKB/Akt) at T157 and T198. Here we show that PKB activation and the appearance of p27pT157 and p27pT198 precede p27-cyclin D1-Cdk4 assembly in early G 1 . PI3K/PKB inhibition rapidly reduced p27pT157 and p27pT198 and dissociated cellular p27-cyclin D1-Cdk4. Mutant p27 allele products lacking phosphorylation at T157 and T198 bound poorly to cellular cyclin D1 and Cdk4. Cellular p27pT157 and p27pT198 coprecipitated with Cdk4 but were not detected in Cdk2 complexes. The addition of p27 to recombinant cyclin D1 and Cdk4 led to cyclin D1-Cdk4-p27 complex formation in vitro. p27 phosphorylation by PKB increased p27-cyclin D1-Cdk4 assembly in vitro but yielded inactive Cdk4. In contrast, Src pretreatment of p27 did not affect p27-cyclin D1-Cdk4 complex formation. However, Src treatment led to tyrosine phosphorylation of p27 and catalytic activation of assembled cyclin D1-Cdk4-p27 complexes. Thus, while PKB-dependent p27 phosphorylation appears to increase cyclin D1-Cdk4-p27 assembly or stabilize these complexes in vitro, cyclin D1-Cdk4-p27 activation requires the tyrosine phosphorylation of p27. Constitutive activation of PKB and Abl or Src family kinases in cancers would drive p27 phosphorylation, increase cyclin D1-Cdk4 assembly and activation, and reduce the cyclin E-Cdk2 inhibitory function of p27. Combined therapy with both Src and PI3K/PKB inhibitors may reverse this process.