Protein kinase Ciota (PKCiota) is an oncogene required for maintenance of the transformed phenotype of non-small cell lung cancer cells. However, the role of PKCiota in lung tumor development has not been investigated. To address this question, we established a mouse model in which oncogenic Kras(G12D) is activated by Cre-mediated recombination in the lung with or without simultaneous genetic loss of the mouse PKCiota gene, Prkci. Genetic loss of Prkci dramatically inhibits Kras-initiated hyperplasia and subsequent lung tumor formation in vivo. This effect correlates with a defect in the ability of Prkci-deficient bronchioalveolar stem cells to undergo Kras-mediated expansion and morphologic transformation in vitro and in vivo. Furthermore, the small molecule PKCiota inhibitor aurothiomalate inhibits Kras-mediated bronchioalveolar stem cell expansion and lung tumor growth in vivo. Thus, Prkci is required for oncogene-induced expansion and transformation of tumor-initiating lung stem cells. Furthermore, aurothiomalate is an effective antitumor agent that targets the tumor-initiating stem cell niche in vivo. These data have important implications for PKCiota as a therapeutic target and for the clinical use of aurothiomalate for lung cancer treatment.