Chronic myelogenous leukemia (CML) is characterized by the expression of the BCR-ABL tyrosine kinase, which results in increased cell proliferation and inhibition of apoptosis. In this study, we show in both BCR-ABL cells (Mo7e-p210 and BaF/3-p210) and primary CML CD34+ cells that STI571 inhibition of BCR-ABL tyrosine kinase activity results in a G(1) cell cycle arrest mediated by the PI3K pathway. This arrest is associated with a nuclear accumulation of p27(Kip1) and down-regulation of cyclins D and E. As a result, there is a reduction of the cyclin E/Cdk2 kinase activity and of the retinoblastoma protein phosphorylation. By quantitative reverse transcription-PCR we show that BCR-ABL/PI3K regulates the expression of p27(Kip1) at the level of transcription. We further show that BCR-ABL also regulates p27(Kip1) protein levels by increasing its degradation by the proteasome. This degradation depends on the ubiquitinylation of p27(Kip1) by Skp2-containing SFC complexes: silencing the expression of Skp2 with a small interfering RNA results in the accumulation of p27(Kip1). We also demonstrate that BCR-ABL cells show transcriptional up-regulation of Skp2. Finally, expression of a p27(Kip1) mutant unable of being recognized by Skp2 results in inhibition of proliferation of BCR-ABL cells, indicating that the degradation of p27(Kip1) contributes to the pathogenesis of CML. In conclusion, these results suggest that BCR-ABL regulates cell cycle in CML cells at least in part by inducing proteasome-mediated degradation of the cell cycle inhibitor p27(Kip1) and provide a rationale for the use of inhibitors of the proteasome in patients with BCR-ABL leukemias.