p27Kip1 controls cell proliferation by binding to and regulating the activity of cyclin-dependent kinases (Cdks). Here we show that Cdk inhibition and p27 stability are regulated through direct phosphorylation by tyrosine kinases. A conserved tyrosine residue (Y88) in the Cdk-binding domain of p27 can be phosphorylated by the Src-family kinase Lyn and the oncogene product BCR-ABL. Y88 phosphorylation does not prevent p27 binding to cyclin A/Cdk2. Instead, it causes phosphorylated Y88 and the entire inhibitory 3(10)-helix of p27 to be ejected from the Cdk2 active site, thus restoring partial Cdk activity. Importantly, this allows Y88-phosphorylated p27 to be efficiently phosphorylated on threonine 187 by Cdk2 which in turn promotes its SCF-Skp2-dependent degradation. This direct link between transforming tyrosine kinases and p27 may provide an explanation for Cdk kinase activities observed in p27 complexes and for premature p27 elimination in cells that have been transformed by activated tyrosine kinases.