Phosphatidylinositol 3-kinase (PI 3-kinase) has a regulatory 85 kDa adaptor subunit whose SH2 domains bind phosphotyrosine in specific recognition motifs, and a catalytic 110 kDa subunit. Mutagenesis of the p110 subunit, within a sequence motif common to both protein and lipid kinases, demonstrates a novel intrinsic protein kinase activity which phosphorylates the p85 subunit on serine at a stoichiometry of approximately 1 mol of phosphate per mol of p85. This protein-serine kinase activity is detectable only upon high affinity binding of the p110 subunit with its unique substrate, the p85 subunit. Tryptic phosphopeptide mapping revealed that the same major peptide was phosphorylated in p85 alpha both in vivo in cultured cells and in the purified recombinant enzyme. N-terminal sequence and mass analyses were used to identify Ser608 as the major phosphorylation site on p85 alpha. Phosphorylation of the p85 subunit at this serine causes an 80% decrease in PI 3-kinase activity, which can subsequently be reversed upon treatment with protein phosphatase 2A. These results have implications for the role of inter-subunit serine phosphorylation in the regulation of the PI 3-kinase in vivo.