The retroviral oncogene p3k (v-p3k) of avian sarcoma virus 16 (ASV16) codes for the catalytic subunit of phosphoinositide (PI) 3-kinase, p110alpha. The v-P3k protein is oncogenic in vivo and in vitro; its cellular counterpart, c-P3k, lacks oncogenicity. Fusion of viral Gag sequences to the amino terminus of c-P3k activates the transforming potential. Activation can also be achieved by the addition of a myristylation signal to the amino terminus or of a farnesylation signal to the carboxyl terminus of c-P3k. A mutated myristylation signal was equally effective; it also caused a strong increase in the kinase activity of P3k. Mutations that inactivate lipid kinase activity abolish oncogenicity. The transforming activity of P3k is correlated with the ability to induce activating phosphorylation in Akt. Point mutations and amino-terminal deletions recorded in v-P3k were shown to be irrelevant to the activation of oncogenic potential. Interactions of P3k with the regulatory subunit of PI 3-kinase, p85, or with Ras are not required for transformation. These results support the conclusion that the oncogenicity of P3k depends on constitutive lipid kinase activity. Akt is an important and probably essential downstream component of the oncogenic signal from P3k.