PRL-3, a protein tyrosine phosphatase, has attracted much attention as its transcript is consistently upregulated in the process of colorectal cancer metastases to secondary organs. We studied mice injected via the tail vein with CHO cells stably expressing EGFP-tagged PRL-3 or catalytically inactive mutant PRL-3 (C104S). Our data showed that the EGFP-PRL-3-expressing cells rapidly induce metastatic tumor formation in lung, while EGFP-PRL-3 (C104S)-expressing cells lose this metastastic activity. Furthermore, detailed microscopic examinations revealed that some EGF-PRL-3-, but not EGFP-PRL-3 (C104S)-, expressing cells form micro- and macro-metastatic solid tumors that sprout into blood vessels. Our studies provide clear evidence for a causative role of PRL-3 phosphatase activity in cancer metastasis and tumor-related angiogenesis events. The catalytic domain of PRL-3 could serve as an ideal therapeutic target for drug development to block the spread of colorectal cancer.