The biological function of the PTEN tumor suppressor is mainly attributed to its lipid phosphatase activity. This study demonstrates that mammalian PTEN is a protein tyrosine phosphatase that selectively dephosphorylates insulin receptor substrate-1 (IRS1), a mediator of insulin and IGF signals. IGF signaling was defective in cells lacking NEDD4, a PTEN ubiquitin ligase, whereas AKT activation triggered by EGF or serum was unimpaired. Defective IGF signaling caused by NEDD4 deletion, including phosphorylation of IRS1 and AKT, was rescued by PTEN ablation. We demonstrate the nature of PTEN as an IRS1 phosphatase by direct biochemical analysis and cellular reconstitution, showing that NEDD4 supports insulin-mediated glucose metabolism and is required for the proliferation of IGF1 receptor-dependent but not EGF receptor-dependent tumor cells. Thus, PTEN is a protein phosphatase for IRS1, and its antagonism by NEDD4 promotes signaling by IGF and insulin.