XB130 is a recently cloned 130 kDa-adaptor protein and Src kinase substrate, structurally similar to actin-filament-associated protein. Here we show that XB130 is predominantly expressed in the thyroid. Given that XB130 is a thyroid-specific tyrosine kinase substrate, we asked whether it is targeted by RET/PTC, a genetically rearranged, constitutively active, thyroid-specific tyrosine kinase that plays a pathogenic role in papillary thyroid cancer. RET/PTC induced robust tyrosine phosphorylation of XB130, which promoted its subsequent association with the p85alpha subunit of phosphatidylinositol 3-kinase (PI 3-kinase). We identified tyrosine 54 of XB130 as the major target of RET/PTC-mediated phosphorylation and a critical binding site for the SH2 domains of p85alpha. Importantly, downregulation of XB130 in TPC1 papillary thyroid cancer cells, harboring the RET/PTC1 kinase, strongly reduced Akt activity without altering ERK1/2 phosphorylation, and concomitantly inhibited cell-cycle progression and survival in suspension. In conclusion, XB130 is a novel substrate of the RET/PTC kinase that links RET/PTC signaling to PI 3-kinase activation, and thereby plays an important role in sustaining proliferation and survival of thyroid tumor cells.