Lats2 is a new member of the Lats tumor suppressor family. The human LATS2 gene is located at chromosome 13q11-12, which has been shown to be a hot spot (67%) for LOH in nonsmall cell lung cancer. In order to understand the function of LATS2 in the control of tumor development, we ectopically expressed mouse Lats2 via retroviral infection in NIH3T3/v-ras cells to examine whether Lats2 plays a role in suppressing tumor development and regulating cell proliferation. We have found that ectopic expression of Lats2 in NIH3T3/v-ras cells suppresses development of tumors in athymic nude mice and inhibits proliferation of NIH3T3/v-ras cells in an in vitro assay. Cell cycle profile analysis demonstrated that ectopic expression of Lats2 inhibited the G1/S transition. Further mechanistic studies revealed that cyclin E/CDK2 kinase activity was downregulated in Lats2-transduced NIH3T3/v-ras cells, while other cell cycle regulators controlling the G1/S transition were not affected. We have also shown that LATS2 kinase activity and two LATS conserved domains (LCDs) are required for Lats2 to suppress tumorigenicity and to inhibit cell growth. In addition, the LATS2 protein is cytoplasmic during interphase in NIH3T3 cells, while it becomes localized to the mitotic apparatus during mitosis. Finally, we propose a model in which a combination of mammalian Lats2 and Lats1 control cell proliferation by negatively regulating different cell cycle check points.