The serine-threonine kinase, Akt, has been linked to cholesterol-sensitive signaling mechanisms, suggesting a possible means whereby cholesterol might affect tumor cell growth and survival. However, it has not been shown whether Akt itself, as distinct from upstream components of the pathway (e.g., membrane phosphoinositides), can be directly responsible for cholesterol-mediated effects. Consistent with this possibility, we identified an Akt1 subpopulation in cholesterol-rich lipid raft fractions prepared from LNCaP human prostate cancer cells. Phosphorylation of this Akt subspecies was ablated with methyl-beta-cyclodextrin, a cholesterol-binding compound, under conditions where nonlipid raft-resident Akt was unaffected. A myristoylated Akt1 (MyrAkt1) fusion protein expressed in LNCaP cells was found to be highly enriched in lipid rafts, indicating that oncogenic Akt is overrepresented in cholesterol-rich membranes compared with wild-type Akt. Notably, lipid raft-resident MyrAkt1 exhibited a markedly distinct substrate preference compared with MyrAkt1 immunoprecipitated from cytosol and nonraft membrane fractions, suggesting a redirection of signal transduction when the protein is present in cholesterol-rich membranes. Expression of MyrAkt1 in LNCaP cells overcame their characteristic dependence on constitutive signaling through the phosphoinositide 3'-kinase pathway. This protective effect was substantially diminished with cyclodextrin treatment. Phosphorylation of Akt substrates in lipid raft fractions, but not in cytosol/nonraft membrane fractions, was ablated with cyclodextrin. In addition, in control (LacZ transfected) cells, lipid raft fractions were relatively enriched in phosphorylated Akt substrates. Collectively, these data show that a subpopulation of Akt is cholesterol sensitive and that the oncogenic effects conferred by myristoylation arise, in part, from the tendency of the membrane-targeted form of the protein to reside in cholesterol-rich membrane microdomains.