Non-melanoma skin cancer, the most common neoplasia after solid organ transplantation, causes serious morbidity and mortality and is related to sun exposure. Cyclosporin A (CsA) has been used widely to prevent rejection in organ transplantation. The mechanism of CsA action in causing cancer was thought to be well understood via immunosuppression. Here, we show that CsA promotes primary skin tumor growth in immune-deficient mice and keratinocyte growth in vitro. In addition, CsA enhances keratinocyte survival from removal of extracellular matrix or UVB radiation. At the molecular level, CsA increases AKT activation after serum treatment and UVB irradiation. Furthermore we found that expression of PTEN, the negative regulator of AKT activation, is significantly reduced post-CsA in human HaCaT and A431 cells and in mouse skin in vivo. CsA-induced PTEN down-regulation occurs at the transcription level and is epidermal growth factor receptor-dependent. Such PTEN suppression is required for increased AKT activation. Inhibition of AKT activation abolishes CsA-promoted growth and survival, indicating that AKT hyperactivation is essential for both growth and survival of CsA-treated cells. In addition, mTOR signaling as a known AKT downstream pathway is required for CsA-enhanced growth and survival. Taken together, we have identified the PTEN/AKT pathway as new molecular targets of CsA in epidermal keratinocytes, suggesting a previously unknown mechanism in CsA-enhanced skin carcinogenesis. Our findings challenge assumptions about how CsA-associated tumors arise in skin.