Ubiquitin-mediated proteolysis due to the anaphase-promoting complex/cyclosome (APC/C) is essential for separation of sister chromatids, requiring degradation of the anaphase inhibitor Pds1, and for exit from mitosis, requiring inactivation of cyclin B Cdk1 kinases. Exit from mitosis in yeast involves accumulation of the cyclin kinase inhibitor Sic1 as well as cyclin proteolysis mediated by APC/C bound by the activating subunit Cdh1/Hct1 (APC(Cdh1)). Both processes require the Cdc14 phosphatase, whose release from the nucleolus during anaphase causes dephosphorylation and thereby activation of Cdh1 and accumulation of another protein, Sic1 (refs 4-7). We do not know what determines the release of Cdc14 and enables it to promote Cdk1 inactivation, but it is known to be dependent on APC/C bound by Cdc20 (APC(Cdc20)) (ref. 4). Here we show that APC(Cdc20) allows activation of Cdc14 and promotes exit from mitosis by mediating proteolysis of Pds1 and the S phase cyclin Clb5 in the yeast Saccharomyces cerevisiae. Degradation of Pds1 is necessary for release of Cdc14 from the nucleolus, whereas degradation of Clb5 is crucial if Cdc14 is to overwhelm Cdk1 and activate its foes (Cdh1 and Sic1). Remarkably, cells lacking both Pds1 and Clb5 can proliferate in the complete absence of Cdc20.