Human PRL-1, PRL-2, and PRL-3 tyrosine phosphatases induce the malignant transformation of epithelial cells. We tested the hypothesis that the oncogenic effects of PRL occur by increasing cellular proliferation. Cells stably transfected with PRL-1 or PRL-2 exhibited 2.7-3.3-fold increases over control cells in the rate of DNA synthesis and the proportion of cells in S-phase, and they progressed more rapidly from G1 into S. In addition, cells overexpressing either PRL-1 or PRL-2 exhibited enhanced cyclin-dependent kinase 2 (CDK2) activity and significantly lower p21(Cip1/Waf1) protein levels, and PRL-1 overexpressing cells had higher cyclin A protein levels than control cells. We conclude that PRL phosphatases increase cell proliferation by stimulating progression from G1 into S phase, and this process may be dependent on the down regulation of the cyclin dependent kinase inhibitor p21(Cip1/Waf1).