We have identified a novel type 2C serine-threonine phosphatase, FIN13, whose expression is induced by fibroblast growth factor 4 and serum in late G1 phase. The protein encoded by FIN13 cDNA includes N- and C-terminal domains with significant homologies to type 2C phosphatases, a domain homologous to collagen, and an acidic domain. FIN13 expression predominates in proliferating tissues. Bacterially expressed FIN13 and FIN13 expressed in mammalian cells exhibit serine-threonine phosphatase activity, which requires Mn2+ and is insensitive to inhibition by okadaic acid. FIN13 is localized in the nuclei of transiently transfected cells. Cotransfection of FIN13-expressing plasmids with a plasmid that expresses the neomycin resistance gene inhibits the growth of drug-resistant colonies in NIH 3T3, HeLa and Rat-1 cells. In transiently transfected cells, FIN13 inhibits DNA synthesis and results in the accumulation of cells in G1 and early S phases. Similarly, the induction of expression of FIN13 under the control of a tetracycline-regulated promoter in NIH 3T3 cells leads to growth inhibition, with accumulation of cells in G1 and early S phases. Thus, overexpression and/or unregulated expression of FIN13 inhibits cell cycle progression, indicating that the physiological role of this phosphatase may be that of regulating the orderly progression of cells through the mitotic cycle by dephosphorylating specific substrates which are important for cell proliferation.