The tumour suppressor PTEN (phosphatase and tensin deleted on chromosome 10) regulates major cellular functions via lipid phosphatase-dependent and -independent mechanisms. Despite its fundamental pathophysiological importance, how PTEN's cellular activity is regulated has only been partially elucidated. We report that the scaffolding proteins β-arrestins (β-arrs) are important regulators of PTEN. Downstream of receptor-activated RhoA/ROCK signalling, β-arrs activate the lipid phosphatase activity of PTEN to negatively regulate Akt and cell proliferation. In contrast, following wound-induced RhoA activation, β-arrs inhibit the lipid phosphatase-independent anti-migratory effects of PTEN. β-arrs can thus differentially control distinct functional outputs of PTEN important for cell proliferation and migration.