The tumor suppressor gene PTEN is a phosphoinositide phosphatase that is inactivated by deletion and/or mutation in diverse human tumors. Wild-type PTEN is expressed both in the cytoplasm and nucleus in normal cells, with a preferential nuclear localization in differentiated or resting cells. To elucidate the relationship between PTEN's subcellular localization and its biologic activities, we constructed different PTEN mutants that targeted PTEN protein into different subcellular compartments. Our data show that the subcellular localization patterns of a PTEN (deltaPDZB) mutant versus a G129R phosphatase mutant were indistinguishable from those of wild-type PTEN. In contrast, the Myr-PTEN mutant demonstrated an enhanced association with the cell membrane. We found that nuclear PTEN alone is capable of suppressing anchorage-independent growth and facilitating G1 arrest in U251MG cells without inhibiting Akt activity. Nuclear compartment-specific PTEN-induced growth suppression is dependent on possessing a functional lipid phosphatase domain. In addition, the down-regulation of p70S6K could be mediated, at least in part, through activation of AMP-activated protein kinase in an Akt-independent fashion. Introduction of a constitutively active mutant of Akt, Akt-DD, only partially rescues nuclear PTEN-mediated growth suppression. Our collective results provide the first direct evidence that PTEN can contribute to G1 growth arrest through an Akt-independent signaling pathway.