We show here that c-Myc antagonizes the cyclin-dependent kinase (CDK) inhibitor p27Kip1. p27 expressed from recombinant retroviruses in Rat1 cells associated with and inhibited cyclin E/CDK2 complexes, induced accumulation of the pRb and p130 proteins in their hypophosphorylated forms, and arrested cells in G1. Prior expression of c-Myc prevented inactivation of cyclin E/CDK2 as well as dephosphorylation of pRb and p130, and allowed continuous cell proliferation in the presence of p27. This effect did not require ubiquitin-mediated degradation of p27. Myc altered neither the susceptibility of cyclin E/CDK2 to inhibition by p27, nor the intrinsic CDK-inhibitory activity of p27, but induced sequestration of p27 in a form unable to bind cyclin E/CDK2. Neither Myc itself nor other G1-cyclin/CDK complexes were directly responsible for p27 sequestration. Retroviral expression of G1 cyclins (D1-3, E or A) or of the Cdc25A phosphatase did not overcome p27-induced arrest. Growth rescue by Myc required dimerization with Max, DNA binding and an intact transcriptional activation domain, as previously shown for cellular transformation. We propose that this activity is mediated by the product of an as yet unknown Myc-Max target gene(s) and represents an essential aspect of Myc's mitogenic and oncogenic functions.