The accurate regulation of phosphorylation at the kinetochore is essential for establishing chromosome bi-orientation. Phosphorylation of kinetochore proteins by the Aurora B kinase destabilizes improper kinetochore–microtubule attachments, whereas the phosphatase PP2A has a counteracting role. Imbalanced phosphoregulation leads to error-prone chromosome segregation and aneuploidy, a hallmark of cancer cells. However, little is known about the molecular events that control the balance of phosphorylation at the kinetochore. Here, we show that localization of SET/TAF1, an oncogene product, to centromeres maintains Aurora B kinase activity by inhibiting PP2A, thereby correcting erroneous kinetochore–microtubule attachment. SET localizes at the inner centromere by interacting directly with shugoshin 2, with SET levels declining at increased distances between kinetochore pairs, leading to establishment of chromosome bi-orientation. Moreover, SET overexpression induces chromosomal instability by disrupting kinetochore–microtubule attachment. Thus, our findings reveal the novel role of SET in fine-tuning the phosphorylation level at the kinetochore by balancing the activities of Aurora B and PP2A.