PHLPP is a family of Ser/Thr protein phosphatases that contains PHLPP1 and PHLPP2 isoforms. We have shown previously that PHLPP functions as a tumor suppressor by negatively regulating Akt signaling in cancer cells. Here we report the identification of ribosomal protein S6 kinase 1 (S6K1) as a novel substrate of PHLPP. Overexpression of both PHLPP isoforms resulted in a decrease in S6K1 phosphorylation in cells, and this PHLPP-mediated dephosphorylation of S6K1 was independent of its ability to dephosphorylate Akt. Conversely, S6K1 phosphorylation was increased in cells depleted of PHLPP expression. Furthermore, we showed that the insulin receptor substrate 1 (IRS-1) expression and insulin-induced Akt phosphorylation were significantly decreased as the result of activation of the S6K-dependent negative feedback loop in PHLPP knockdown cells. Functionally, the phosphorylation of ribosomal protein S6 (rpS6) and the amount of phosphorylated rpS6 bound to the translation initiation complex were increased in PHLPP-knockdown cells. This correlated with increased cell size, protein content, and rate of cap-dependent translation. Taken together, our results demonstrate that loss of PHLPP expression activates the S6K-dependent negative feedback loop and that PHLPP is a novel player involved in regulating protein translation initiation and cell size via direct dephosphorylation of S6K1.