Sprouty family proteins are novel regulators of growth factor actions. Human Sprouty 2 (hSPRY2) inhibits the proliferation of a number of different cell types. However, the mechanisms involved in the anti-proliferative actions of hSPRY2 remain to be elucidated. Here we have demonstrated that hSPRY2 increases the amount of the tumor suppressor phosphatase and tensin homolog deleted on chromosome 10 (PTEN) and decreases its phosphorylation. The resultant increase in PTEN activity is reflected in decreased activation of Akt by epidermal growth factor and serum. Consistent with increased PTEN activity, in hSPRY2-expressing cells, the progression of cells from the G1 to S phase is decreased. By using PTEN null primary mouse embryonic fibroblasts and their isogenic controls as well as small interfering RNA against PTEN, we demonstrated that PTEN is necessary for hSPRY2 to inhibit Akt activation by epidermal growth factor as well as cell proliferation. Overall, we concluded that hSPRY2 mediates its anti-proliferative actions by altering PTEN content and activity.