We have created two knock-in mouse models to study the mechanisms that regulate p27 in normal cells and cause misregulation of p27 in tumors: p27^S10A, in which Ser10 is mutated to Ala; and p27^CK–, in which point mutations abrogate the ability of p27 to bind cyclins and CDKs. These two mutant alleles identify steps in a pathway that controls the proteasomal degradation of p27 uniquely in quiescent cells: Dephosphorylation of p27 on Ser10 inhibits p27 nuclear export and promotes its assembly into cyclin–CDK complexes, which is, in turn, necessary for p27 turnover. We further show that Ras-dependent lung tumorigenesis is associated with increased phosphorylation on Ser10 and cytoplasmic mislocalization of p27. Indeed, we find that p27^S10A is refractory to Ras-induced cytoplasmic translocation and that p27^S10A mice are tumor resistant. Thus, phosphorylation of p27 on Ser10 is an important event in the regulation of the tumor suppressor function of p27.