The cyclin-dependent kinase (CDK) inhibitor p27 has an important role in cell cycle regulation. Reduced expression of p27 is commonly associated with poor prognosis in many malignancies, including gastric cancer. Cytoplasmic p27 mislocalization may be an additional indicator of high-grade tumors and poor prognosis in cancer. As chronic infection by Helicobacter pylori is the most important risk factor for gastric cancer development, we evaluated the effects of H. pylori on p27 expression and localization in gastric cancer cells. Co-culture of gastric cells with H. pylori induced cytoplasmic p27 expression and reduced nuclear p27 expression in vitro. Cytoplasmic p27 expression was associated with and dependent upon phosphorylation of p27 at T157 and T198: wild-type p27 accumulated in the cytoplasm, but non-phosphorylatable mutants affecting T157 or T198 were nuclear in H. pylori-infected cells. These post-translational p27 changes were secondary to activation of cellular phosphoinositide-3 kinase (PI3K) and AKT signaling pathways, and dependent upon a functional H. pylori cag pathogenicity island. We investigated the clinical significance of cytoplasmic p27 mislocalization in 164 cases of resected gastric cancer in tissue microarrays. In 97 cases (59%), cytoplasmic p27 mislocalization was observed, and this was associated with increased mortality in multivariate analysis. These results show that H. pylori infection induces AKT/PI3K-mediated phosphorylation of p27 at T157 and T198 to cause cytoplasmic p27 mislocalization in gastric cancer, and that p27 mislocalization is an adverse prognostic feature in gastric cancer. This is the first demonstration of the translocation of a specific bacterial virulence factor that post-translationally regulates a host cell CDK inhibitor. This is of particular significance, because p27 has both tumor-suppressive and oncogenic activities, depending upon its subcellular localization. Cytoplasmic mislocalization of p27 induced by H. pylori may be an important mechanistic link between H. pylori infection and gastric carcinogenesis.