The PTEN/MMAC1 phosphatase is a tumor suppressor gene implicated in a wide range of human cancers. Here we provide biochemical and functional evidence that PTEN/MMAC1 acts a negative regulator of the phosphoinositide 3-kinase (PI3-kinase)/Akt pathway. PTEN/MMAC1 impairs activation of endogenous Akt in cells and inhibits phosphorylation of 4E-BP1, a downstream target of the PI3-kinase/Akt pathway involved in protein translation, whereas a catalytically inactive, dominant negative PTEN/MMAC1 mutant enhances 4E-BP1 phosphorylation. In addition, PTEN/MMAC1 represses gene expression in a manner that is rescued by Akt but not PI3-kinase. Finally, higher levels of Akt activation are observed in human prostate cancer cell lines and xenografts lacking PTEN/MMAC1 expression when compared with PTEN/MMAC1-positive prostate tumors or normal prostate tissue. Because constitutive activation of either PI3-kinase or Akt is known to induce cellular transformation, an increase in the activation of this pathway caused by mutations in PTEN/MMAC1 provides a potential mechanism for its tumor suppressor function.