Cell cycle progression is regulated by cyclin-dependent kinases (cdk's), which in turn are regulated by their interactions with stoichiometric inhibitors, such as p27 Kip1. Although p27 associates with cyclin D-cyclin-dependent kinase 4 (cdk4) constitutively, whether or not it inhibits this complex is dependent on the absence or presence of a specific tyrosine phosphorylation that converts p27 from a bound inhibitor to a bound noninhibitor under different growth conditions. This phosphorylation occurs within the 3-10 helix of p27 and may dislodge the helix from cdk4's active site to allow ATP binding. Here we show that the interaction of nonphosphorylated p27 with cdk4 also prevents the activating phosphorylation of the T-loop by cyclin H-cdk7, the cdk-activating kinase (CAK). Even though the cyclin H-cdk7 complex is present and active in contact-arrested cells, p27's association with cyclin D-cdk4 prevents T-loop phosphorylation. When p27 is tyrosine phosphorylated in proliferating cells or in vitro with the tyrosine Y kinase Abl, phosphorylation of cdk4 by cyclin H-cdk7 is permitted, even without dissociation of p27. This suggests that upon release from the contact-arrested state, a temporal order for the reactivation of inactive p27-cyclin D-cdk4 complexes must exist: p27 must be Y phosphorylated first, directly permitting cyclin H-cdk7 phosphorylation of residue T172 and the consequent restoration of kinase activity. The non-Y-phosphorylated p27-cyclin D-cdk4 complex could be phosphorylated by purified Csk1, a single-subunit CAK from fission yeast, but was still inactive due to p27's occlusion of the active site. Thus, the two modes by which p27 inhibits cyclin D-cdk4 are independent and may reinforce one another to inhibit kinase activity in contact-arrested cells, while maintaining a reservoir of preformed complex that can be activated rapidly upon cell cycle reentry.