Signaling pathways regulating the differentiation program of epidermal cells overlap widely with those activated during apoptosis. How differentiating cells remain protected from premature death, however, is still poorly defined. We show here that the phosphoinositide 3-kinase (PI3K)/Akt pathway is activated at early stages of mouse keratinocyte differentiation both in culture and in the intact epidermis in vivo. Expression of active Akt in keratinocytes promotes growth arrest and differentiation, whereas pharmacological blockade of PI3K inhibits the expression of "late" differentiation markers and leads to death of cells that would otherwise differentiate. Mechanistically, the activation of the PI3K/Akt pathway in keratinocyte differentiation depends on the activity of the epidermal growth factor receptor and Src families of tyrosine kinases and the engagement of E-cadherin-mediated adhesion. During this process, PI3K associates increasingly with cadherin-catenin protein complexes bearing tyrosine phosphorylated YXXM motifs. Thus, the PI3K signaling pathway regulates the choice between epidermal cell differentiation and death at the cross-talk between tyrosine kinases and cadherin-associated catenins.