Tie2 is an endothelium-specific receptor tyrosine kinase that is required for both normal embryonic vascular development and tumor angiogenesis and is thought to play a role in vascular maintenance. However, the signaling pathways responsible for the function of Tie2 remain unknown. In this report, we demonstrate that the p85 subunit of phosphatidylinositol 3-kinase (PI3-kinase) associates with Tie2 and that this association confers functional lipid kinase activity. Mutation of tyrosine 1101 of Tie2 abrogated p85 association both in vitro and in vivo in yeast. Tie2 was found to activate PI3-kinase in vivo as demonstrated by direct measurement of increases in cellular phosphatidylinositol 3-phosphate and phosphatidylinositol 3,4-bisphosphate, by plasma membrane translocation of a green fluorescent protein-Akt pleckstrin homology domain fusion protein, and by downstream activation of the Akt kinase. Activation of PI3-kinase was abrogated in these assays by mutation of Y1101 to phenylalanine, consistent with a requirement for this residue for p85 association with Tie2. These results suggest that activation of PI3-kinase and Akt may in part account for Tie2’s role in both embryonic vascular development and pathologic angiogenesis, and they are consistent with a role for Tie2 in endothelial cell survival.