Carcinomas of the biliary tract are aggressive malignancies in humans. Loss of the tumour suppressor PTEN has previously been associated with cholangiocarcinoma development in a murine model. Activation of KRAS is reported in up to one-third of human cholangiocarcinomas and 50% of gall bladder carcinomas. In this study we aimed to test the potential interaction between PTEN and KRAS mutation in biliary tract malignancy. We used an inducible Cre–LoxP-based approach to coordinately delete PTEN and activate KRAS within the adult mouse biliary epithelium. We found that activation of KRAS alone has little effect upon biliary epithelium. Loss of PTEN alone results in the development of low-grade neoplastic lesions, following long latency and at low incidence. Combination of both mutations causes rapid development of biliary epithelial proliferative lesions, which progress through dysplasia to invasive carcinoma. We conclude that activation of the PI3′K pathway following loss of PTEN is sufficient to drive slow development of low-grade biliary lesions in mice. In contrast, mutational activation of KRAS does not result in a similar phenotype, despite a prediction that this should activate both the RAF–MEK–ERK and PI3′-kinase pathways. However, mutation of both genes results in rapid tumourigenesis, arguing that PTEN normally functions as a ‘brake’ on the PI3′-kinase pathway, limiting the influence of KRAS activation. Mutation of both genes creates a ‘permissive’ environment, allowing the full effects of both mutations to be manifested. These data reveal an in vivo synergy between these mutations and provides a new mouse model of biliary tract malignancy. Copyright © 2013 Pathological Society of Great Britain and Ireland. Published by John Wiley & Sons, Ltd.