Cell polarity in Drosophila epithelia, oocytes and neuroblasts is controlled by the evolutionarily conserved PAR/aPKC complex, which consists of the serine-threonine protein kinase aPKC and the PDZ-domain proteins Bazooka(Baz) and PAR-6. The PAR/aPKC complex is required for the separation of apical and basolateral plasma membrane domains, for the asymmetric localization of cell fate determinants and for the proper orientation of the mitotic spindle. How the complex exerts these different functions is not known. We show that the lipid phosphatase PTEN directly binds to Baz in vitro and in vivo, and colocalizes with Baz in the apical cortex of epithelia and neuroblasts. PTEN is an important regulator of phosphoinositide turnover that antagonizes the activity of PI3-kinase. We show that Pten mutant ovaries and embryos lacking maternal and zygotic Pten function display phenotypes consistent with a function for PTEN in the organization of the actin cytoskeleton. In freshly laid eggs, the germ plasm determinants oskarmRNA and Vasa are not localized properly to the posterior cytocortex and pole cells do not form. In addition, the actin-dependent posterior movement of nuclei during early cleavage divisions does not occur and the synchrony of nuclear divisions at syncytial blastoderm stages is lost. Pten mutant embryos also show severe defects during cellularization. Our data provide evidence for a link between the PAR/aPKC complex, the actin cytoskeleton and PI3-kinase signaling mediated by PTEN.