Cdc14 is an essential phosphatase in yeast but its role in the mammalian cell cycle remains obscure. We report here that Cdc14b-knockout cells display unscheduled induction of multiple cell cycle regulators resulting in early entry into DNA replication and mitosis from quiescence. Cdc14b dephosphorylates Ser5 at the C-terminal domain (CTD) of RNA polymerase II, a major substrate of cyclin-dependent kinases. Lack of Cdc14b results in increased CTD-Ser5 phosphorylation, epigenetic modifications that mark active chromatin, and transcriptional induction of cell cycle regulators. These data suggest a function for mammalian Cdc14 phosphatases in the control of transcription during the cell cycle.