We have previously identified C1 domain-containing phosphatase and TENsin homologue (C1-TEN) as being an intracellular binding partner for Axl receptor tyrosine kinase (RTK). C1-TEN is a tensin-related protein that houses an N-terminal region with predicted structural similarity to PTEN. Here, we report our observations on the effects of ectopic expression of C1-TEN in HEK293 cells, which resulted in profound molecular and phenotypic changes. Stable expression of C1-TEN altered cellular morphology, with less cell spreading and weaker filamentous actin staining. Cells overexpressing C1-TEN were inhibited greatly in their proliferation and migration rates as compared with mock-transfected cells. Furthermore, serum starvation-induced apoptosis caused a twofold increase in caspase 3 activity in C1-TEN-overexpressing cells vs. mock cells. In addition, C1-TEN-overexpressing cells showed a markedly reduced phosphorylation of Akt/PKB kinase and its substrate GSK3, as well as reduced Akt enzymatic activity. No such effects on JNK were observed. Also, serum-stimulated activation of Akt was delayed in C1-TEN-overexpressing cells, while no difference in profile of ERK activation was observed. Furthermore, cells expressing a C1-TEN mutant where the putative phosphatase active site cysteine at position 231 was substituted for a serine displayed full restoration of both cell proliferation and Akt activation. In conclusion, C1-TEN appears to be a novel intracellular phosphatase that negatively regulates the Akt/PKB signaling cascade, and is similar to its relative PTEN in this respect. However, the particular domain organization of C1-TEN may enable it to regulate RTK and other signaling complexes that are linked to Akt/PKB signaling in a unique manner.