The Gab1 protein is tyrosine phosphorylated in response to various growth factors and serves as a docking protein that recruits a number of downstream signaling proteins, including phosphatidylinositol 3-kinase (PI-3 kinase). To determine the role of Gab1 in signaling via the epidermal growth factor (EGF) receptor (EGFR) we tested the ability of Gab1 to associate with and modulate signaling by this receptor. We show that Gab1 associates with the EGFR in vivo and in vitro via pTyr sites 1068 and 1086 in the carboxy-terminal tail of the receptor and that overexpression of Gab1 potentiates EGF-induced activation of the mitogen-activated protein kinase and Jun kinase signaling pathways. A mutant of Gab1 unable to bind the p85 subunit of PI-3 kinase is defective in potentiating EGFR signaling, confirming a role for PI-3 kinase as a downstream effector of Gab1. Inhibition of PI-3 kinase by a dominant-interfering mutant of p85 or by Wortmannin treatment similarly impairs Gab1-induced enhancement of signaling via the EGFR. The PH domain of Gab1 was shown to bind specifically to phosphatidylinositol 3,4,5-triphosphate [PtdIns(3,4,5)P3], a product of PI-3 kinase, and is required for activation of Gab1-mediated enhancement of EGFR signaling. Moreover, the PH domain mediates Gab1 translocation to the plasma membrane in response to EGF and is required for efficient tyrosine phosphorylation of Gab1 upon EGF stimulation. In addition, overexpression of Gab1 PH domain blocks Gab1 potentiation of EGFR signaling. Finally, expression of the gene for the lipid phosphatase PTEN, which dephosphorylates PtdIns(3,4,5)P3, inhibits EGF signaling and translocation of Gab1 to the plasma membrane. These results reveal a novel positive feedback loop, modulated by PTEN, in which PI-3 kinase functions as both an upstream regulator and a downstream effector of Gab1 in signaling via the EGFR.