Previous studies have suggested that the two subunits of phosphatidylinositol (PI) 3-kinase, p85 and p110, function as localizing and catalytic subunits, respectively. Using recombinant p85 and p110 molecules, we have reconstituted the specific interaction between the two subunits of mouse PI 3-kinase in cells and in vitro. We have previously shown that the region between the two Src homology 2 (SH2) domains of p85 is able to form a functional complex with the 110-kDa subunit in vivo. In this report, we identify the corresponding domain in p110 which directs the binding to p85. We demonstrate that the interactive domains in p85 and p110 are less than 103 and 124 amino acids, respectively, in size. We also show that the association of p85 and p110 mediated by these domains is critical for PI 3-kinase activity. Surprisingly, a complex between a 102-amino-acid segment of p85 and the full-length p110 molecule is catalytically active, whereas p110 alone has no activity. In addition to the catalytic domain in the carboxy-terminal region, 123 amino acids at the amino terminus of p110 were required for catalytic activity and were sufficient for the interaction with p85. These results indicate that the 85-kDa subunit, previously thought to have only a linking role in localizing the p110 catalytic subunit, is an important component of the catalytic complex.