Phosphorylation of a threonine residue (T308 in Akt1) in the activation loop of Akt kinases is a prerequisite for deregulated Akt activity frequently observed in neoplasia. Akt phosphorylation in vivo is balanced by the opposite activities of kinases and phosphatases. Here we describe that targeting Akt kinase to the cell membrane markedly reduced sensitivity of phosphorylated Akt to dephosphorylation by protein phosphatase 2A. This effect was amplified by occupancy of the ATP binding pocket by either ATP or ATP-competitive inhibitors. Mutational analysis revealed that R273 in Akt1 and the corresponding R274 in Akt2 are essential for shielding T308 in the activation loop against dephosphorylation. Thus, occupancy of the nucleotide binding pocket of Akt kinases enables intramolecular interactions that restrict phosphatase access and sustain Akt phosphorylation. This mechanism provides an explanation for the "paradoxical" Akt hyperphosphorylation induced by ATP-competitive inhibitor, A-443654. The lack of phosphatase resistance further contributes insight into the mechanism by which the human Akt2 R274H missense mutation may cause autosomal-dominant diabetes mellitus.