The Cdc14 dual-specificity phosphatases regulate key events in the eukaryotic cell cycle. However, little is known about the function of mammalian CDC14B family members. Here, we demonstrate that subcellular localization of CDC14B protein is cell cycle regulated. CDC14B can bind, bundle, and stabilize microtubules in vitro independently of its catalytic activity. Basic amino acid residues within the nucleolar targeting domain are important for both retaining CDC14B in the nucleolus and preventing microtubule bundling. Overexpression of CDC14B resulted in the formation of cytoplasmic CDC14B and microtubule bundles in interphase cells. These microtubule bundles were resistant to microtubule depolymerization reagents and enriched in acetylated alpha-tubulin. Expression of cytoplasmic forms of CDC14B impaired microtubule nucleation from the microtubule organization center. CDC14B is thus a novel microtubule-bundling and -stabilizing protein, whose regulated subcellular localization may help modulate spindle and microtubule dynamics in mitosis.