3-Phosphoinositide-dependent protein kinase-1 (PDK1) mediates phosphorylation and activation of members of the AGC protein kinase family and plays an essential role in insulin signaling and action. However, whether and how PDK1 activity is regulated in cells remains largely uncharacterized. In the present study, we show that PDK1 undergoes insulin-stimulated and phosphatidylinositol 3-kinase-dependent phosphorylation at Ser244 in the activation loop and at a novel site: Ser163 in the hinge region between the two lobes of the kinase domain. Sequence alignment studies revealed that the residue corresponding to Ser163 of PDK1 in all other AGC kinases is glutamate, suggesting that a negative charge at this site may be important for PDK1 function. Replacing Ser163 with a negatively charged residue, glutamate, led to a 2-fold increase in PDK1 activity. Molecular modeling studies suggested that phosphorylated Ser163 may form additional hydrogen bonds with Tyr149 and Gln223. In support of this, mutation of Tyr149 to Ala is sufficient to reduce PDK1 activity. Taken together, our results suggest that PDK1 phosphorylation of Ser163 may provide a mechanism to fine-tune PDK1 activity and function in cells.