Protein phosphatase 2A (PP2A) is one of the most abundantly expressed serine/threonine protein phosphatases. A large body of evidence suggests that PP2A is a tumor suppressor and plays critical roles in regulating apoptosis. PP2A is a heterotrimeric protein complex. Its substrate specificity, localization, and activity are regulated by regulatory subunits of PP2A. A recent study has demonstrated that single nucleotide polymorphism in B56ε (PPP2R5E), a B56 family regulatory subunit of PP2A, is associated with human soft tissue sarcoma. This raises the possibility that B56ε is involved in tumorigenesis and plays important roles in regulating apoptosis. However, this hypothesis has not been tested experimentally. Our previous studies revealed that B56ε regulates a number of developmental signaling pathways during early embryonic patterning. Here we report novel functions of B56ε in regulating apoptosis. We provide evidence that B56ε has both anti- and pro-apoptotic functions. B56ε suppresses p53-independent apoptosis during neural development, but triggers p53-dependent apoptosis. Mechanistically, B56ε regulates the p53-dependent apoptotic pathway solely through controlling the stability of p53 protein. In addition to its function in regulating apoptosis, we show that B56ε undergoes proteolytic cleavage. The cleavage of B56ε is mediated by caspase-3 and occurs on the carboxyl side of an evolutionarily conserved N-terminal "DKXD" motif. These results demonstrate that B56ε, a substrate of caspase-3, is an essential regulator of apoptosis. So far, we have identified an alternative translation isoform and a caspase cleavage product of B56ε. The significance of post-transcriptional regulation of B56ε is discussed.