Protein kinase B (PKB, also termed Akt) is a phosphatidylinositol 3' kinase (PI3'K)-dependent enzyme implicated in survival signaling and human tumorigenesis. To identify potential targets of this protein kinase, we employed a genetic screen in Drosophila. Among several genes that genetically interacted with PKB was trachealess (trh), which encodes a bHLH-PAS domain transcription factor required for development of the trachea and other tubular organs. Trh activates expression of the fibroblast growth factor receptor Breathless, which, in turn, is required for directed migration of all tracheal branches. Using a combination of biochemical and transgenic approaches, we show that direct phosphorylation of Trh by PKB at serine 665 is essential for nuclear localization and functional activation of this regulator of branching morphogenesis.