PTEN is a recently identified tumor suppressor inactivated in a variety of cancers such as glioblastoma and endometrial and prostate carcinoma. It contains an amino-terminal phosphatase domain and acts as a phosphatidylinositol 3,4,5-trisphosphate phosphatase antagonizing the activity of the phosphatidylinositol 3-OH kinase. PTEN also contains a carboxyl-terminal domain, and we addressed the role of this region that, analogous to the amino-terminal phosphatase domain, is the target of many mutations identified in tumors. Expression of carboxyl-terminal mutants in PTEN-deficient glioblastoma cells permitted the anchorage-independent growth of the cells that otherwise was suppressed by wild-type PTEN. The stability of these mutants in cells was reduced because of rapid degradation. Although the carboxyl-terminal region contains regulatory PEST sequences and a PDZ-binding motif, these specific elements were dispensable for the tumor-suppressor function. The study of carboxyl-terminal point mutations affecting the stability of PTEN revealed that these were located in strongly predicted beta-strands. Surprisingly, the phosphatase activity of these mutants was affected in correlation with the degree of disruption of these structural elements. We conclude that the carboxyl-terminal region is essential for regulating PTEN stability and enzymatic activity and that mutations in this region are responsible for the reversion of the tumor-suppressor phenotype. We also propose that the molecular conformational changes induced by these mutations constitute the mechanism for PTEN inactivation.