The introduction of peptides into living cells for the purpose of manipulating cellular biochemistry has become widespread throughout biology. However, little is known about the behavior of these short sequences of amino acids within cells, particularly those used as substrates or inhibitors for kinases and other enzymes. We utilized a quantitative, single-cell assay to demonstrate that an 11-amino acid peptide was efficiently phosphorylated by intracellular protein kinase B (PKB) in fibrosarcoma cell line HT1080 and in NIH-3T3 cells. The phosphorylated peptide was also readily dephosphorylated by intracellular phosphatases. Assays of the peptide's phosphorylation in single, living cells measured the balance of the activities of PKB and phosphatases in that cell. At a peptide concentration below the K(M) of PKB and the phosphatases, the ratio of phosphorylated to nonphosphorylated peptide at the steady state was independent of the peptide concentration. A single-cell assay utilizing this peptide revealed the existence of two subpopulations of cells whose unique activities had hitherto been obscured by population averaging. Additional studies of cells stimulated by PDGF demonstrated that a quantitative analysis of PKB activation in response to a physiological stimulus was possible. These studies demonstrated that short peptides can remain specific within the complex intracellular milieu and function as sensitive reporters of the activation state of native kinases within live cells.