The Aggregatibacter actinomycetemcomitans cytolethal distending toxin (Cdt) induces G2 arrest and apoptosis in lymphocytes and other cell types. We have shown that the active subunit, CdtB, exhibits phosphatidylinositol-3,4,5-triphosphate (PIP3) phosphatase activity, leading us to propose that Cdt toxicity is the result of PIP3 depletion and perturbation of phosphatidylinositol-3-kinase (PI-3K)/PIP3/Akt signalling. To further explore this relationship, we have focused our analysis on identifying residues that comprise the catalytic pocket and are critical to substrate binding rather than catalysis. In this context, we have generated several CdtB mutants and demonstrate that, in each instance, the ability of the toxin to induce cell cycle arrest correlates with retention of phosphatase activity. We have also assessed the effect of Cdt on downstream components of the PI-3K signalling pathway. In addition to depletion of intracellular concentrations of PIP3, toxin-treated lymphocytes exhibit decreases in pAkt and pGSK3β. Further analysis indicates that toxin-treated cells exhibit a concomitant loss in Akt activity and increase in GSK3β kinase activity consistent with observed changes in their phosphorylation status. We demonstrate that cell susceptibility to Cdt is dependent upon dephosphorylation and concomitant activation of GSK3β. Finally, we demonstrate that, in addition to lymphocytes, HeLa cells exposed to a CdtB mutant that retains phosphatase activity and not DNase activity undergo G2 arrest in the absence of H2AX phosphorylation. Our results provide further insight into the mode of action by which Cdt may function as an immunotoxin and induce cell cycle arrest in target cells such as lymphocytes. © 2016 John Wiley & Sons Ltd.