Small molecule inhibitors of HER2 are clinically active in women with advanced HER2-positive breast cancer who have progressed on trastuzumab treatment. However, the effectiveness of this class of agents is limited by either primary resistance or acquired resistance. Using an unbiased genetic approach, we performed a genome wide loss-of-function short hairpin RNA screen to identify novel modulators of resistance to lapatinib, a recently approved anti-HER2 tyrosine kinase inhibitor. Here, we have identified the tumor suppressor PTEN as a modulator of lapatinib sensitivity in vitro and in vivo. In addition, we show that two dominant activating mutations in PIK3CA (E545K and H1047R), which are prevalent in breast cancer, also confer resistance to lapatinib. Furthermore, we show that phosphatidylinositol 3-kinase (PI3K)–induced lapatinib resistance can be abrogated through the use of NVP-BEZ235, a dual inhibitor of PI3K/mTOR. Our data show that deregulation of the PI3K pathway, either through loss-of-function mutations in PTEN or dominant activating mutations in PIK3CA, leads to lapatinib resistance, which can be effectively reversed by NVP-BEZ235. [Cancer Res 2008;68(22):9221–30]