The regulation of PTEN intrinsic biochemical properties has not been fully elucidated. In this report, we investigated the role of the PTEN carboxyl-terminal tail domain in regulating its membrane targeting and catalytic functions. Characterization of a panel of PTEN phosphorylation site mutants revealed that mutating Ser-385 to alanine (S385A) promoted membrane localization in vivo and phosphatase activity in vitro. Furthermore, S385A mutation was associated with a substantial reduction in the phosphorylation of the Ser-380/Thr-382/Thr-383 cluster. Therefore, Ser-385 could prime additional dephosphorylation events to regulate PTEN catalytic activity. Moreover, substituting Ser-380/Thr-382/Thr-383 to phosphomimic residues reversed the phosphatase activity of the S385A mutation. Next, we further defined the underlying mechanisms responsible for the COOH-terminal tail region in modulating PTEN biological activity. We have identified an interaction between the 71-amino acid carboxyl-terminal tail region and the CBRIII motif of the C2 domain, which has been implicated in membrane binding. In addition, a synthetic phosphomimic peptide encompassing the phosphorylation site cluster between amino acids 368 and 390 within the tail region mediated the suppression of PTEN catalytic activity in vitro. This same peptide when expressed in cultured cells also impeded PTEN membrane localization and enhanced phospho-Akt levels. Thus, our data suggest that the COOH-terminal tail can act as an autoinhibitory domain to control both PTEN membrane recruitment and phosphatase activity.