The SOCS1 gene coding for suppressor of cytokine signaling 1 is frequently repressed in hepatocellular carcinoma (HCC), and hence SOCS1 is considered a tumor suppressor in the liver. However, the tumor-suppressor mechanisms of SOCS1 are not yet well understood. SOCS1 is known to inhibit pro-inflammatory cytokine production and signaling and to promote activation of the p53 tumor suppressor. However, we observed that SOCS1-deficient mice developed numerous and large liver tumor nodules following treatment with the hepatocarcinogen diethylnitrosamine (DEN) without showing increased interleukin-6 production or activation of p53. On the other hand, the livers of DEN-treated Socs1-null mice showed elevated levels of p21(CIP1/WAF1) protein (p21). Even though p21 generally functions as a tumor suppressor, paradoxically many cancers, including HCC, are known to express elevated levels of p21 that correlate with poor prognosis. We observed elevated p21 expression also in the regenerating livers of SOCS1-deficient mice and in cisplatin-treated Socs1-null hepatocytes, wherein the p21 protein showed increased stability. We show that SOCS1 interacts with p21 and promotes its ubiquitination and proteasomal degradation. Besides, the DEN-treated livers of Socs1-null mice showed increased nuclear and cytosolic p21 staining, and the latter was associated with growth factor-induced, phosphatidylinositol 3-kinase-dependent phosphorylation of p21 in SOCS1-deficient hepatocytes. Cytosolic p21 is often associated with malignancy and chemo-resistance in many cancers. Accordingly, SOCS1-deficient hepatocytes showed increased resistance to apoptosis that was reversed by shRNA-mediated p21 knockdown. In the regenerating livers of Socs1-null mice, increased p21 expression coincided with elevated cyclinD levels. Correspondingly, SOCS1-deficient hepatocytes showed increased proliferation to growth factor stimulation that was reversed by p21 knockdown. Overall, our findings indicate that the tumor-suppressor functions of SOCS1 in the liver could be mediated, at least partly, via regulation of the expression, stability and subcellular distribution of p21 and its paradoxical oncogenic functions, namely, resistance to apoptosis and increased proliferation.