The Actinobacillus actinomycetemcomitans cytolethal distending toxin (Cdt) is a potent immunotoxin that induces G(2) arrest in human lymphocytes. We now show that the CdtB subunit exhibits phosphatidylinositol (PI)-3,4,5-triphosphate phosphatase activity. Breakdown product analysis indicates that CdtB hydrolyzes PI-3,4,5-P(3) to PI-3,4-P(2) and therefore functions in a manner similar to phosphatidylinositol 5-phosphatases. Conserved amino acids critical to catalysis in this family of enzymes were mutated in the cdtB gene. The mutant proteins exhibit reduced phosphatase activity along with decreased ability to induce G(2) arrest. Consistent with this activity, Cdt induces time-dependent reduction of PI-3,4,5-P(3) in Jurkat cells. Lymphoid cells with defects in SHIP1 and/or ptase and tensin homolog deleted on chromosome 10 (PTEN) (such as Jurkat, CEM, Molt) and, concomitantly, elevated PI-3,4,5-P(3) levels were more sensitive to the toxin than HUT78 cells which contain functional levels of both enzymes and low levels of PI-3,4,5-P(3). Finally, reduction of Jurkat cell PI-3,4,5-P(3) synthesis using the PI3K inhibitors, wortmannin and LY290004, protects cells from toxin-induced cell cycle arrest. Collectively, these studies show that the CdtB not only exhibits PI-3,4,5-P(3) phosphatase activity, but also that toxicity in lymphocytes is related to this activity.