During anaphase the mitotic spindle extends dramatically, promoting the segregation of the chromosomes into the two daughter cells. The spindle midzone, assembled at the onset of anaphase, is critical for this extension. How this assembly is linked to progression through the cell cycle is not fully understood. Our data show that in budding yeast the conserved phosphatase Cdc14, activated in early anaphase, regulates the formation of the spindle midzone. Cdc14 dephosphorylates residues of a core midzone component, the conserved microtubule bundling factor Ase1, that were previously phosphorylated by the cyclin-dependent kinase complex. In addition, Cdc14 activation is also indirectly responsible for midzone localization of the separase-Slk19 complex. This dual control of midzone assembly by Cdc14 is necessary for the formation of the focused and centered spindle midzone that drives the continuous and full elongation of the anaphase spindle. The identification of Ase1 as a key Cdc14 substrate elucidates how spindle midzone assembly is coordinated with the metaphase to anaphase transition.