Hyperactivation of the PI 3-kinase/AKT pathway is a driving force of many cancers. Here we identify the AKT-inactivating phosphatase PHLPP1 as a prostate tumor suppressor. We show that Phlpp1-loss causes neoplasia and, on partial Pten-loss, carcinoma in mouse prostate. This genetic setting initially triggers a growth suppressive response via p53 and the Phlpp2 ortholog, and reveals spontaneous Trp53 inactivation as a condition for full-blown disease. Surprisingly, the codeletion of PTEN and PHLPP1 in patient samples is highly restricted to metastatic disease and tightly correlated to deletion of TP53 and PHLPP2. These data establish a conceptual framework for progression of PTEN mutant prostate cancer to life-threatening disease.