Akt/protein kinase B critically regulates the balance between cell survival and apoptosis. Phosphorylation of Akt at two key sites, the activation loop and the hydrophobic motif, activates the kinase and promotes cell survival. The mechanism of dephosphorylation and signal termination is unknown. Here, we identify a protein phosphatase, PH domain leucine-rich repeat protein phosphatase (PHLPP), that specifically dephosphorylates the hydrophobic motif of Akt (Ser473 in Akt1), triggering apoptosis and suppressing tumor growth. The effects of PHLPP on apoptosis are prevented in cells expressing an S473D construct of Akt, revealing that the hydrophobic motif is the primary cellular target of PHLPP. PHLPP levels are markedly reduced in several colon cancer and glioblastoma cell lines that have elevated Akt phosphorylation. Reintroduction of PHLPP into a glioblastoma cell line causes a dramatic suppression of tumor growth. These data are consistent with PHLPP terminating Akt signaling by directly dephosphorylating and inactivating Akt.