Bone morphogenetic protein-2 (BMP-2) is an evolutionary conserved protein that is essential for embryonic development. BMP-2 is highly expressed in approximately 98% of human lung carcinomas with little expression in normal lung tissues. BMP-2 has been shown to enhance mobility, invasiveness, and metastasis of cancer cell lines. During development, BMP-2 induces the proto-oncogene phosphoinositide 3-kinase (PI3K)/mammalian target of rapamycin (mTOR) signaling pathway to regulate stem cell differentiation. We show that BMP-2 induces the phosphorylation of mTOR in A549 and H1299 lung cancer cell lines, which is attenuated by the PI3K antagonists LY-294002 and wortmannin. p70S6 kinase, which is a direct downstream target of mTOR, is also regulated by BMP-2 in lung cancer cell lines. We find that BMP-2 induces cyclin E in A549 and H1299 cells, which is mediated by the PI3K/mTOR signaling pathway. The regulation of cyclin E by BMP-2 occurs through a Smad 1/5-independent mechanism. Forced expression of BMP-2 in A549 cells (A549/BMP-2) induces transformation as shown by an increase in foci formation. The mTOR antagonist, rapamycin, prevented foci formation of the A549/BMP-2 cells. This study provides evidence that BMP-2-mediated transformation of lung cancer cells involves the activation of the PI3K/mTOR signaling pathway.