PTEN, a tumor suppressor among the most commonly mutated proteins in human cancer, is recognized to be both a protein phosphatase and a phosphatidylinositol 3,4,5-trisphosphate (PtdIns(3,4,5)P(3)) 3-phosphatase. Previous work [Maehama and Dixon, J. Biol. Chem. 273 (1998) 13375-13378] has led to a consensus that inositol phosphates are not physiologically relevant substrates for PTEN. In contrast, we demonstrate that PTEN is an active inositol 1,3,4,5,6-pentakisphosphate (Ins(1,3,4,5,6)P(5)) 3-phosphatase when expressed and purified from bacteria or HEK cells. Kinetic data indicate Ins(1,3,4,5,6)P(5) (K(m)=7.1 microM) and PtdIns(3,4,5)P(3) (K(m)=26 microM) compete for PTEN in vivo. Transient transfection of HEK cells with PTEN decreased Ins(1,3,4,5,6)P(5) levels. We discuss the physiological significance of these studies in relation to recent work showing that dephosphorylation of Ins(1,3,4,5,6)P(5) to inositol 1,4,5,6-tetrakisphosphate is a cell signaling event.