Phosphatase and tensin homolog deleted on chromosome 10 (PTEN) is an important negative regulator of cell growth and a tumor suppressor. Its growth-attenuating activity is based on the dephosphorylation of phosphatidylinositol 3,4,5-trisphosphate (PIP3), an essential second messenger for the phosphoinositide 3-kinase/Akt signaling pathway. This activity may require localization of PTEN to cytoplasmic membranes. Yet PTEN can also localize to the cell nucleus where its functions remain unclear. Here we present data that define a short sequence in the N-terminal region of PTEN required for cytoplasmic localization. We will refer to this sequence as cytoplasmic localization signal (CLS). It could function as a non-canonical signal for nuclear export or as a cytoplasmic retention signal of PTEN. Mutations within the CLS induce nuclear localization and impair growth suppressive activities of PTEN while preserving lipid phosphatase activity. We propose that nuclear localization of PTEN is not compatible with plasma membrane-targeted growth suppressive functions of PTEN.