The phosphatase of regenerating liver-3 (PRL-3) is a member of protein tyrosine phosphatases and whose deregulation is implicated in tumorigenesis and metastasis of many cancers. However, the underlying mechanism by which PRL-3 is regulated is not known. In this study, we identified the peptidyl prolyl cis/trans isomerase FK506-binding protein 38 (FKBP38) as an interacting protein of PRL-3 using a yeast two-hybrid system. FKBP38 specifically binds to PRL-3 in vivo, and that the N-terminal region of FKBP38 is crucial for binding with PRL-3. FKBP38 overexpression reduces endogenous PRL-3 expression levels, whereas the depletion of FKBP38 by siRNA increases the level of PRL-3 protein. Moreover, FKBP38 promotes degradation of endogenous PRL-3 protein via protein-proteasome pathway. Furthermore, FKBP38 suppresses PRL-3-mediated p53 activity and cell proliferation. These results demonstrate that FKBP38 is a novel regulator of the oncogenic protein PRL-3 abundance and that alteration in the stability of PRL-3 can have a dramatic impact on cell proliferation. Thus, FKBP38 may play a critical role in tumorigenesis. (C) 2011 Elsevier Inc. All rights reserved.