PH domain leucine-rich-repeats protein phosphatase (PHLPP) is a family of Ser/Thr protein phosphatases that serve as tumor suppressors by negatively regulating Akt. Our recent studies have demonstrated that the ubiquitin proteasome pathway has an important role in the downregulation of PHLPP in colorectal cancer. In this study, we show that the deubiquitinase USP46 stabilizes the expression of both PHLPP isoforms by reducing the rate of PHLPP degradation. USP46 binds to PHLPP and directly removes the polyubiquitin chains from PHLPP in vitro and in cells. Increased USP46 expression correlates with decreased ubiquitination and upregulation of PHLPP proteins in colon cancer cells, whereas knockdown of USP46 has the opposite effect. Functionally, USP46-mediated stabilization of PHLPP and the subsequent inhibition of Akt result in a decrease in cell proliferation and tumorigenesis of colon cancer cells in vivo. Moreover, reduced USP46 protein level is found associated with poor PHLPP expression in colorectal cancer patient specimens. Taken together, these results indentify a tumor suppressor role of USP46 in promoting PHLPP expression and inhibiting Akt signaling in colon cancer.