PHLPP1 and PHLPP2 phosphatases exert their tumor-suppressing functions by dephosphorylation and inactivation of Akt in several breast cancer and glioblastoma cells. However, Akt, or other known targets of PHLPPs that include PKC and ERK, may not fully elucidate the physiological role of the multifunctional phosphatases, especially their powerful apoptosis induction function. Here, we show that PHLPPs induce apoptosis in cancer cells independent of the known targets of PHLPPs. We identified Mst1 as a binding partner that interacts with PHLPPs both in vivo and in vitro. PHLPPs dephosphorylate Mst1 on the T387 inhibitory site, which activate Mst1 and its downstream effectors p38 and JNK to induce apoptosis. The same T387 site can be phosphorylated by Akt. Thus, PHLPP, Akt, and Mst1 constitute an autoinhibitory triangle that controls the fine balance of apoptosis and proliferation that is cell type and context dependent.