The cyclin-dependent kinase inhibitor p27^kip1 is a putative tumor suppressor for human cancer. The mechanism underlying p27^kip1 deregulation in human cancer is, however, poorly understood. We demonstrate that the serine/threonine kinase Akt regulates cell proliferation in breast cancer cells by preventing p27^kip1-mediated growth arrest. Threonine 157 (T157), which maps within the nuclear localization signal of p27^kip1, is a predicted Akt-phosphorylation site. Akt-induced T157 phosphorylation causes retention of p27^kip1 in the cytoplasm, precluding p27^kip1-induced G1 arrest. Conversely, the p27^kip1-T157A mutant accumulates in cell nuclei and Akt does not affect p27^kip1–T157A-mediated cell cycle arrest. Lastly, T157-phosphorylated p27^kip1 accumulates in the cytoplasm of primary human breast cancer cells coincident with Akt activation. Thus, cytoplasmic relocalization of p27^kip1, secondary to Akt-mediated phosphorylation, is a novel mechanism whereby the growth inhibitory properties of p27^kip1 are functionally inactivated and the proliferation of breast cancer cells is sustained.