Oncogenic activation-loop mutants of KIT, the receptor for stem cell factor (SCF), are commonly observed in acute myeloid leukemia (AML) and systemic mastocytosis (SM); however, unlike the KIT juxtamembrane mutants (found in patients with gastrointestinal stromal tumors [GISTs]), the activation-loop mutants are commonly insensitive to inhibition by tyrosine kinase inhibitors. Furthermore, little is known about the signaling pathways that contribute to oncogenic KIT-induced transformation in SM or AML. We demonstrate that expression of KITD814V (KIT activation-loop mutant) in primary hematopoietic stem and progenitor cells induces constitutive KIT autophosphorylation, promotes ligand-independent hyperproliferation, skews myeloid differentiation towards the granulocytic lineage, and promotes promiscuous cooperation with multiple cytokines, including G-CSF, M-CSF and IL-3. KITD814V expressing primary mast cells also demonstrated hyperproliferation in response to SCF, IL-3, IL-4 and IL-10. Biochemical analyses of KITD814V expressing cells revealed constitutively elevated levels of phosphatidylinositol-3-kinase (PI3K) and its downstream substrate, the Rho family GTPase Rac. Genetic disruption of p85a, the regulatory subunit of class IA PI-3Kinase, but not of p85β, or genetic disruption of the hematopoietic cell-specific Rho GTPase, Rac2, normalized KITD814V-induced ligand independent hyperproliferation in vitro. Additionally, deficiency of p85α or Rac2 corrected the promiscuous hyperproliferation observed in response to multiple cytokines in both KITD814V expressing stem/progenitor cells as well as mast cells in vitro. Although p85α is hyperphosphorylated and constitutively bound to KITD814V in bone marrow cells in vitro; its physiologic role in transformation in vivo is not known. To address this, we generated a new mouse model to study KITD814V induced transformation in myeloid cells as opposed to previously described models that primarily result in the generation of phenotypes resembling acute lymphocytic leukemia via this mutation. Our results show that transplantation of KITD814V expressing bone marrow cells from C57/BL6 strain of mice into syngeneic recipients results in a fatal myeloproliferative disease (MPD) characterized by leukocytosis, splenomegaly, disruption of the splenic architecture as well as myeloid cell infiltration in the lung and liver. Importantly, in this model, transplantation of KITD814V expressing p85α deficient bone marrow cells rescued the MPD phenotype, including splenomegaly, peripheral blood leukocytosis and the reduced life span associated with the transplantation of KITD814V expressing wildtype bone marrow cells. Treatment of KITD814V-expressing hematopoietic progenitors with either a Rac inhibitor (NC23766) or rapamycin showed a dose-dependent suppression in KITD814V induced growth. Taken together, our results describe the generation of a new murine transplant model to study KITD814V induced transformation and identify p85a and Rac2 as potential novel therapeutic target for the treatment of KITD814V-bearing diseases including SM and AML.