Class I PI3-kinases signal downstream of receptor tyrosine kinases and G protein-coupled receptors and have been implicated in tumorigenesis. Although the oncogenic potential of the PI3-kinase subunit p110alpha requires its mutational activation, other p110 isoforms can induce transformation when overexpressed in the wild-type state. In wild-type p110alpha, N345 in the C2 domain forms hydrogen bonds with D560 and N564 in the inter-SH2 (iSH2) domain of p85, and mutations of p110alpha or p85 that disrupt this interface lead to increased basal activity and transformation. Sequence analysis reveals that N345 in p110alpha aligns with K342 in p110beta. This difference makes wild-type p110beta analogous to a previously described oncogenic mutant, p110alpha-N345K. In this report AECC members Backer and Fiser now show that p110beta is inhibited by p85 to a lesser extent than p110alpha and is not differentially inhibited by wild-type p85 versus p85 mutants that disrupt the C2-iSH2 domain interface. Similar results were seen in soft agar and focus-formation assays, where p110beta was similar to p110alpha-N345K in transforming potential. Inhibition of p110beta by p85 was enhanced by a K342N mutation in p110beta, which led to decreased activity in vitro, decreased basal Akt and ribosomal protein S6 kinase (S6K1) activation, and decreased transformation in NIH 3T3 cells. Moreover, unlike wild-type p110beta, p110beta-K342N was differentially regulated by wild-type and mutant p85, suggesting that the inhibitory C2-iSH2 interface is functional in this mutant. This study shows that the enhanced transforming potential of p110beta is the result of its decreased inhibition by p85, due to the disruption of an inhibitory C2-iSH2 domain interface.