Interleukin-3 (IL-3), IL-5, and granulocyte-macrophage colony-stimulating factor regulate the survival, proliferation, and differentiation of hematopoietic lineages. Phosphatidylinositol 3-kinase (PI3K) has been implicated in the regulation of these processes. Here we investigate the molecular mechanism by which PI3K regulates cytokine-mediated proliferation and survival in the murine pre-B-cell line Ba/F3. IL-3 was found to repress the expression of the cyclin-dependent kinase inhibitor p27^KIP1 through activation of PI3K, and this occurs at the level of transcription. This transcriptional regulation occurs through modulation of the forkhead transcription factor FKHR-L1, and IL-3 inhibited FKHR-L1 activity in a PI3K-dependent manner. We have generated Ba/F3 cell lines expressing a tamoxifen-inducible active FKHR-L1 mutant [FKHR-L1(A3):ER*]. Tamoxifen-mediated activation of FKHR-L1(A3):ER* resulted in a striking increase in p27^KIP1 promoter activity and mRNA and protein levels as well as induction of the apoptotic program. The level of p27^KIP1 appears to be critical in the regulation of cell survival since mere ectopic expression of p27^KIP1 was sufficient to induce Ba/F3 apoptosis. Moreover, cell survival was increased in cytokine-starved bone marrow-derived stem cells from p27^KIP1 null-mutant mice compared to that in cells from wild-type mice. Taken together, these observations indicate that inhibition of p27^KIP1transcription through PI3K-induced FKHR-L1 phosphorylation provides a novel mechanism of regulating cytokine-mediated survival and proliferation.