Lipid rafts are membrane microdomains distinct from caveolae, whose functions in polypeptide growth factor signalling remain unclear. Here we show that in small cell lung cancer (SCLC) cells, specific growth factor receptors such as c-Kit associate with lipid rafts and that these domains play a critical role in the activation of phosphoinositide 3-kinase (PI3K) signalling. The class I_A p85/p110α associated with Src in lipid rafts and was activated by Src in vitro. Lipid raft integrity was essential for Src activation in response to stem cell factor (SCF) and raft disruption selectively inhibited activation of protein kinase B (PKB)/Akt in response to SCF stimulation. Moreover, inhibition of Src kinases blocked PKB/Akt activation and SCLC cell growth. The use of fibroblasts with targeted deletion of the Src family kinase genes confirmed the role of Src kinases in PKB/Akt activation by growth factor receptors. Moreover a constitutively activated mutant of Src also stimulated PI3K/Akt in lipid rafts, indicating that these microdomains play a role in oncogenic signalling. Together our data demonstrate that lipid rafts play a key role in the activation of PI3K signalling by facilitating the interaction of Src with specific PI3K isoforms.