Protein kinase C iota (PKCι), a serine/threonine kinase required for cell polarity, proliferation and migration, is commonly up- or downregulated in cancer. PKCι is a human oncogene but whether this is related to its role in cell polarity and what repertoire of oncogenes acts in concert with PKCι is not known. We developed a panel of candidate oncogene expressing Madin-Darby canine kidney (MDCK) cells and demonstrated that H-Ras, ErbB2 and phosphatidylinositol 3-kinase transformation led to non-polar spheroid morphogenesis (dysplasia), whereas MDCK spheroids expressing c-Raf or v-Src were largely polarized. We show that small interfering RNA (siRNA)-targeting PKCι decreased the size of all spheroids tested and partially reversed the aberrant polarity phenotype in H-Ras and ErbB2 spheroids only. This indicates distinct requirements for PKCι and moreover that different thresholds of PKCι activity are required for these phenotypes. By manipulating PKCι function using mutant constructs, siRNA depletion or chemical inhibition, we have demonstrated that PKCι is required for polarization of parental MDCK epithelial cysts in a 3D matrix and that there is a threshold of PKCι activity above and below which, disorganized epithelial morphogenesis results. Furthermore, treatment with a novel PKCι inhibitor, CRT0066854, was able to restore polarized morphogenesis in the dysplastic H-Ras spheroids. These results show that tightly regulated PKCι is required for normal-polarized morphogenesis in mammalian cells and that H-Ras and ErbB2 cooperate with PKCι for loss of polarization and dysplasia. The identification of a PKCι inhibitor that can restore polarized morphogenesis has implications for the treatment of Ras and ErbB2 driven malignancies.