Alterations in signalling via protein kinase B (PKB/Akt) and the mammalian target of rapamycin (mTOR) frequently occur in type 2 diabetes and various human malignancies. Proline-rich Akt substrate of 40-kDa (PRAS40) has a regulatory function at the intersection of these pathways. The interaction of PRAS40 with the mTOR complex 1 (mTORC1) inhibits the activity of mTORC1. Phosphorylation of PRAS40 by PKB/Akt and mTORC1 disrupts the binding between mTORC1 and PRAS40, and relieves the inhibitory constraint of PRAS40 on mTORC1 activity. This review summarizes the signalling pathways regulating PRAS40 phosphorylation, as well as the dual function of PRAS40 as substrate and inhibitor of mTORC1 in the physiological situation, and under pathological conditions, such as insulin resistance and cancer.