Akt/protein kinase B controls cell growth, proliferation, and survival. We recently discovered a novel phosphatase PHLPP, for PH domain leucine-rich repeat protein phosphatase, which terminates Akt signaling by directly dephosphorylating and inactivating Akt. Here we describe a second family member, PHLPP2, which also inactivates Akt, inhibits cell-cycle progression, and promotes apoptosis. These phosphatases control the amplitude of Akt signaling: depletion of either isoform increases the magnitude of agonist-evoked Akt phosphorylation by almost two orders of magnitude. Although PHLPP1 and PHLPP2 both dephosphorylate the same residue (hydrophobic phosphorylation motif) on Akt, they differentially terminate Akt signaling by regulating distinct Akt isoforms. Knockdown studies reveal that PHLPP1 specifically modulates the phosphorylation of HDM2 and GSK-3alpha through Akt2, whereas PHLPP2 specifically modulates the phosphorylation of p27 through Akt3. Our data unveil a mechanism to selectively terminate Akt-signaling pathways through the differential inactivation of specific Akt isoforms by specific PHLPP isoforms.