Accumulating evidence suggests that phosphatases play an important role in regulating a variety of signal transduction pathways that have a bearing on cancer. The kinase-associated phosphatase (KAP) is a human dual-specificity protein phosphatase that was identified as a Cdc2- or Cdk2-interacting protein by a yeast two-hybrid screening, yet the biological significance of these interactions remains elusive. We have identified the KAP gene as an overexpressed gene in breast and prostate cancer by using a phosphatase domain-specific differential-display PCR strategy. Here we report that breast and prostate malignancies are associated with high levels of KAP expression. The sublocalization of KAP is variable. In normal cells, KAP is primarily found in the perinuclear region, but in tumor cells, a significant portion of KAP is found in the cytoplasm. Blocking KAP expression by antisense KAP in a tetracycline-regulatable system results in a reduced population of S-phase cells and reduced Cdk2 kinase activity. Furthermore, lowering KAP expression led to inhibition of the transformed phenotype, with reduced anchorage-independent growth and tumorigenic potential in athymic nude mice. These findings suggest that therapeutic intervention might be aimed at repression of KAP gene overexpression in human breast and prostate cancer.