PTEN is a critical tumour suppressor that is frequently mutated in human cancer. We have previously identified a CUG initiated PTEN isoform designated PTENα, which functions in mitochondrial bioenergetics. Here we report the identification of another N-terminal extended PTEN isoform, designated PTENβ. PTENβ translation is initiated from an AUU codon upstream of and in-frame with the AUG initiation sequence for canonical PTEN. We show that the Kozak context and a downstream hairpin structure are critical for this alternative initiation. PTENβ localizes predominantly in the nucleolus, and physically associates with and dephosphorylates nucleolin, which is a multifunctional nucleolar phosphoprotein. Disruption of PTENβ alters rDNA transcription and promotes ribosomal biogenesis, and this effect can be reversed by re-introduction of PTENβ. Our data show that PTENβ regulates pre-rRNA synthesis and cellular proliferation. These results demonstrate the complexity of the PTEN protein family and the diversity of its functions.