Cell migration and retraction are interrelated activities that are crucial for a range of physiological processes such as wound healing and vascular permeability. Immunostaining of brain sections for the specific inhibitor of type-1 protein Ser/Thr phosphatase called PHI-1 showed high expression levels in smooth muscle and especially in vascular endothelial cells. During migration of cultured human lung microvascular endothelial cells, endogenous PHI-1 was concentrated to the trailing edge of the cells. Knockdown of PHI-1 using small interfering RNAs reduced by 45% the rate of HeLa cell migration in a wound-healing assay. These cells exhibited an extremely elongated phenotype relative to controls and time-lapse movies revealed a defect in retraction of the trailing edge. Both HeLa and human vascular endothelial cells depleted of PHI-1 showed increased surface areas relative to controls during cell spreading in a replating assay. Analysis of sequential microscopic images demonstrated this was due to a significant decrease in the number of retraction events, whereas protrusive action was unaffected. The Ser/Thr phosphorylation of several signaling, cytoskeletal and focal-adhesion proteins was unchanged in PHI-1-depleted cells, so the target of PHI-1 inhibited protein-phosphatase 1 remains unidentified. Nonetheless, the results show that PHI-1 participates in regulatory events at the trailing edge of migrating cells and modulates retraction of endothelial and epithelial cells.