In cells expressing the oncogenic Bcr-Abl tyrosine kinase, the regulatory p85 subunit of phosphatidylinositol 3-kinase is phosphorylated on tyrosine residues. We report that this phosphorylation event is readily catalyzed by the Abl and Lck protein-tyrosine kinases in vitro, by Bcr-Abl or a catalytically activated Lck-Y505F in co-transfected COS cells, and by endogenous kinases in transfected Jurkat T cells upon triggering of their T cell antigen receptor. Using these systems, we have mapped a major phosphorylation site to Tyr-688 in the C-terminal SH2 domain of p85. Tyrosine phosphorylation of p85 in vitro or in vivo was not associated with detectable change in the enzymatic activity of the phosphatidylinositol 3-kinase heterodimer, but correlated with a strong reduction in the binding of some, but not all, phosphoproteins to the SH2 domains of p85. This provides an additional candidate to the list of SH2 domains regulated by tyrosine phosphorylation and may explain why association of phosphatidylinositol 3-kinase with some cellular ligands is transient or of lower stoichiometry than anticipated.