The function of Akt (protein kinase B) is regulated by phosphorylation on two sites conserved within the AGC kinase family: the activation loop (Thr-308) in the kinase core and a hydrophobic phosphorylation site on the carboxyl terminus (Ser-473). Thr-308 is phosphorylated by the phosphoinositide-dependent kinase-1, (PDK-1), whereas the mechanism of phosphorylation of the hydrophobic site, tentatively referred to as the PDK-2 site, is unknown. Here we report that phosphorylation of the hydrophobic motif requires catalytically competent Akt. First we show that a kinase-inactive construct of Akt fails to incorporate phosphate at Ser-473 following IGF-1 stimulation in vivo but does incorporate phosphate at Thr-308 and a second carboxyl-terminal site, Thr-450; this ligand triggers the phosphorylation of both sites in wild-type enzyme. Neither does a catalytically inactive construct in which phosphorylation at the activation loop is blocked, T308A, become phosphorylated on the hydrophobic site in response to stimulation. Second, we show that Akt autophosphorylates on the hydrophobic site in vitro: phosphorylation of the activation loop by PDK-1 triggers the phosphorylation of the hydrophobic site in kinase-active, but not thermally inactivated, Akt alpha. Thus, Akt is regulated by autophosphorylation at the Ser-473 hydrophobic site.