Kaposi sarcoma herpesvirus (KSHV) infection is consistently associated with primary effusion lymphomas (PELs) that are non-Hodgkin lymphomas of B-cell origin. All PEL cells are latently infected with KSHV and express latent viral proteins such as the viral cyclin (v-cyclin), which has previously been implicated in down-regulation of cell-cycle inhibitor p27(KIP1) levels via phosphorylation on Thr187. PEL cells retain high levels of p27(KIP1) but yet proliferate actively, which has left the biologic significance of this p27(KIP1) destabilization somewhat elusive. We have recently demonstrated that v-cyclin and p27(KIP1) stably associate in PEL cells. Here we demonstrate that v-cyclin together with its kinase partner CDK6 phosphorylates the associated p27(KIP1) in PEL cells, which represent a biologically relevant model system for KSHV pathobiology. During latent viral replication p27(KIP1) was phosphorylated by v-cyclin-CDK6 predominantly on Ser10, which enhances its cytoplasmic localization. Interestingly, upon reactivation of KSHV lytic cycle, v-cyclin-CDK6 phosphorylated p27(KIP1) on Thr187, which resulted in down-regulation of p27(KIP1) protein levels. These findings indicate that v-cyclin modulates the cell-cycle inhibitory function of p27(KIP1) by phosphorylation in PELs, and also suggest a novel role for v-cyclin in the lytic reactivation of KSHV.