ABSTRACT Middle T antigen (MT), the principal oncoprotein of murine polyomavirus, transforms by association with cellular proteins. Protein phosphatase 2A (PP2A), YAP, Src family tyrosine kinases, Shc, phosphatidylinositol 3-kinase (PI3K), and phospholipase C-γ1 (PLCγ1) have all been implicated in MT transformation. Mutant dl1015, with deletion of residues 338 to 347 in the C-terminal region, has been an enigma, because the basis for its transformation defect has not been apparent. This work probes the dl1015 region of MT. Because the region is proline rich, the hypothesis that it targets Src homology domain 3 (SH3) domains was tested, but mutation of the putative SH3 binding motif did not affect transformation. During this work, two point mutants, W348R and E349K, were identified as transformation defective. Extensive analysis of the E349K mutant is described here. Similar to wild-type MT, the E349K mutant associates with PP2A, YAP, tyrosine kinases, Shc, PI3 kinase, and PLCγ1. The E349K mutant was examined to determine the mechanism for its transformation defect. Assays of cell localization and membrane targeting showed no obvious difference in localization. Src association was normal as assayed by in vitro kinase and MT phosphopeptide mapping. Shc activation was confirmed by its tyrosine phosphorylation. Association of type 1 PI3K with MT was demonstrated by coimmunoprecipitation, showing both PI3K subunits and in vitro activity. Nonetheless, expression of the mutants failed to lead to the activation of two known downstream targets of PI3K, Akt and Rac-1. Strikingly, despite normal association of the E349K mutant with PI3K, cells expressing the mutant failed to elevate phosphatidylinositol (3,4,5)-trisphosphate (PIP3) in mutant-expressing cells. These results indicate a novel unsuspected aspect to PI3K control. IMPORTANCE The gene coding for middle T antigen (MT) is the murine polyomavirus oncogene most responsible for tumor formation. Its study has a history of uncovering novel aspects of mammalian cell regulation. The importance of PI3K activity and tyrosine phosphorylation are two examples of insights coming from MT. This study describes new mutants unable to transform like the wild type that point to novel regulation of PI3K signaling. Previous mutants were defective in PI3K because they failed to bind the enzyme and bring the activity to the membrane. These mutants recruit PI3K activity like the wild type, but fail to elevate the cellular level of PIP3, the product used to signal downstream of PI3K. As a result, they fail to activate either Akt or Rac1, explaining the transformation defect.