Gefitinib is a specific inhibitor of the epidermal growth factor receptor (EGFR) that causes growth delay in cancer cell lines and human tumor xenografts expressing high levels of EGFR. An understanding of the downstream cellular targets of gefitinib will allow the discovery of biomarkers for predicting outcomes and monitoring anti-EGFR therapies and provide information for key targets for therapeutic intervention. In this study, we investigated the role of FOXO3a in gefitinib action and resistance. Using two gefitinib-sensitive (i.e., BT474 and SKBR3) as well as three other resistant breast carcinoma cell lines (i.e., MCF-7, MDA-MB-231, and MDA-MB-453), we showed that gefitinib targets the transcription factor FOXO3a to mediate cell cycle arrest and cell death in sensitive breast cancer cells. In the sensitive cells, gefitinib treatment causes cell cycle arrest predominantly at the G(0)-G(1) phase and apoptosis, which is associated with FOXO3a dephosphorylation at Akt sites and nuclear translocation, whereas in the resistant cells, FOXO3a stays phosphorylated and remains in the cytoplasm. The nuclear accumulation of FOXO3a in response to gefitinib was confirmed in tumor tissue sections from breast cancer patients presurgically treated with gefitinib as monotherapy. We also showed that knockdown of FOXO3a expression using small interfering RNA (siRNA) can rescue sensitive BT474 cells from gefitinib-induced cell-proliferative arrest, whereas reintroduction of active FOXO3a in resistant MDA-MB-231 cells can at least partially restore cell-proliferative arrest and sensitivity to gefitinib. These results suggest that the FOXO3a dephosphorylation and nuclear localization have a direct role in mediating the gefitinib-induced proliferative arrest and in determining sensitivity to gefitinib.