CD148 is a transmembrane tyrosine phosphatase that has been implicated in the regulation of cell growth and transformation. However, the signalling mechanisms of CD148 are incompletely understood. To identify the specific intracellular molecules involved in CD148 signalling, we carried out a modified yeast two-hybrid screening assay. Using the substrate-trapping mutant form of CD148 (CD148 D/A) as bait, we recovered the p85 regulatory subunit of PI3K (phosphoinositide 3-kinase). CD148 D/A, but not catalytically active CD148, interacted with p85 in a phosphorylation-dependent manner in vitro and in intact cells. Growth factor receptor and PI3K activity were also trapped by CD148 D/A via p85 from pervanadate-treated cell lysates. CD148 prominently and specifically dephosphorylated p85 in vitro. Co-expression of CD148 reduced p85 phosphorylation induced by active Src, and attenuated the increases in PI3K activity, yet CD148 did not alter the basal PI3K activity. Finally, CD148 knock-down by siRNA (short interfering RNA) increased PI3K activity on serum stimulation. Taken together, these results demonstrate that CD148 may interact with and dephosphorylate p85 when it is phosphorylated and modulate the magnitude of PI3K activity.