Lenalidomide is the first karyotype-selective therapeutic approved for the treatment of myelodysplastic syndromes (MDS) owing to high rates of erythroid and cytogenetic response in patients with chromosome 5q deletion [del(5q)]. Although haploinsufficiency for the RPS14 gene and others encoded within the common deleted region (CDR) have been implicated in the pathogenesis of the del(5q) phenotype, the molecular basis of the karyotype specificity of lenalidomide remains unexplained. We focused our analysis on possible haplodeficient enzymatic targets encoded within the CDR that play key roles in cell-cycle regulation. We show that the dual specificity phosphatases, Cdc25C and PP2Acα, which are coregulators of the G₂-M checkpoint, are inhibited by lenalidomide. Gene expression was lower in MDS and acute myeloid leukemia (AML) specimens with del(5q) compared with those with alternate karyotypes. Lenalidomide inhibited phosphatase activity either directly (Cdc25C) or indirectly (PP2A) with corresponding retention of inhibitory phospho-tyrosine residues. Treatment of del(5q) AML cells with lenalidomide induced G₂ arrest and apoptosis, whereas there was no effect in nondel(5q) AML cells. Small interfering RNA (shRNA) suppression of Cdc25C and PP2Acα gene expression recapitulated del(5q) susceptibility to lenalidomide with induction of G₂ arrest and apoptosis in both U937 and primary nondel(5q) MDS cells. These data establish a role for allelic haplodeficiency of the lenalidomide inhibitable Cdc25C and PP2Acα phosphatases in the selective drug sensitivity of del(5q) MDS.