Recent studies have demonstrated essential functions for KIF3, a microtubule-directed protein motor, in subcellular transport of several cancer-related proteins, including the b-catenin-cadherin(s) complex. In this study, we report identification of the protein-phosphatase Dusp26 as a novel regulator of the KIF3 motor. Here we undertake yeast two-hybrid screening and identify Kif3a, a motor subunit of the KIF3 heterotrimeric complex, as a novel Dusp26-binding protein. Co-immunoprecipitation and colocalization experiments revealed that Dusp26 associates not only with Kif3a, but also with Kap3, another subunit of the KIF3 complex. Dephosphorylation experiments in vitro and analysis using mutant forms of Dusp26 in intact cells strongly suggested that Dusp26 is recruited to the KIF3 motor mainly by interaction with Kif3a, and thereby dephosphorylates Kap3. Forced expression of Dusp26, but not its catalytically inactive mutant, promoted distribution of b-catenin/N-cadherin, an established KIF3 cargo, to cell-cell junction sites, resulting in increased cell-cell adhesiveness. We also showed that Dusp26 mRNA expression was downregulated in human glioblastoma samples. These results suggest previously unidentified functions of Dusp26 in intracellular transport and cell-cell adhesion. Downregulation of Dusp26 may contribute to malignant phenotypes of glioma.