PTEN, mutated in a variety of human cancers, is a dual specificity protein phosphatase and also possesses D3-phosphoinositide phosphatase activity on phosphatidylinositol 3,4,5-tris-phosphate (PIP(3)), a product of phosphatidylinositol 3-kinase. This PIP(3) phosphatase activity of PTEN contributes to its tumor suppressor function by inhibition of Akt kinase, a direct target of PIP(3). We have recently shown that Akt regulates PDGF-induced DNA synthesis in mesangial cells. In this study, we demonstrate that expression of PTEN in mesangial cells inhibits PDGF-induced Akt activation leading to reduction in PDGF-induced DNA synthesis. As a potential mechanism, we show that PTEN inhibits PDGF-induced protein tyrosine phosphorylation with concomitant dephosphorylation and inactivation of tyrosine phosphorylated and activated PDGF receptor. Recombinant as well as immunopurified PTEN dephosphorylates autophosphorylated PDGF receptor in vitro. Expression of phosphatase deficient mutant of PTEN does not dephosphorylate PDGF-induced tyrosine phosphorylated PDGF receptor. Rather its expression increases tyrosine phosphorylation of PDGF receptor. Furthermore, expression of PTEN attenuated PDGF-induced signal transduction including phosphatidylinositol 3-kinase and Erk1/2 MAPK activities. Our data provide the first evidence that PTEN is physically associated with platelet-derived growth factor (PDGF) receptor and that PDGF causes its dissociation from the receptor. Finally, we show that both the C2 and tail domains of PTEN contribute to binding to the PDGF receptor. These data demonstrate a novel aspect of PTEN function where it acts as an effector for the PDGF receptor function and negatively regulates PDGF receptor activation.