Extracellular matrix (ECM) is a key regulator of tissue morphogenesis and functional differentiation in the mammary gland. We showed recently that laminin-111 (LN1) together with prolactin induces β-casein expression in mammary epithelial cells (MECs) by sustaining STAT5 activation. Others have shown that Rac1 is required for integrin-mediated STAT5 activation, but molecules upstream of Rac1 remain to be elucidated. Here, we show that exposure to three-dimensional (3D) laminin-rich ECM (LrECM) gels changes the localization of phosphoinositide 3-kinase (PI3K) in MECs from diffuse to basal accompanied with the activation of PI3K-Rac1 signaling pathway. We show by co-immunoprecipitation that Rac1 associates with STAT5, and that LrECM treatment enhances this interaction. Blocking PI3K with LY294002 inhibits LrECM-dependent Rac1 activation, attenuates sustained STAT5 phosphorylation and blocks β-casein gene transcription. These results indicate that PI3K is a key mediator of the LN1-induced signaling cascade which controls the activity of transcription factors essential for tissue-specific gene expression.