PTEN phosphorylation at its C-terminal (C-tail) serine/threonine cluster negatively regulates its tumor suppressor function. However, the consequence of such inhibition and its downstream effects in driving lung cancer remain unexplored. Herein, we ascertain the molecular mechanisms by which phosphorylation compromises PTEN function, contributing to lung cancer. Replacement of the serine/threonine residues with alanine generated PTEN-4A, a phosphorylation-deficient PTEN mutant, which suppressed lung cancer cell proliferation and migration. PTEN-4A preferentially localized to the nucleus where it suppressed E2F1-mediated transcription of cell cycle genes. PTEN-4A physically interacted with the transcription factor E2F1 and associated with chromatin at gene promoters with E2F1 DNA-binding sites, a likely mechanism for its transcriptional suppression function. Deletion analysis revealed that the C2 domain of PTEN was indispensable for suppression of E2F1-mediated transcription. Further, we uncovered cancer-associated C2 domain mutant proteins that had lost their ability to suppress E2F1-mediated transcription, supporting the concept that these mutations are oncogenic in patients. Consistent with these findings, we observed increased PTEN phosphorylation and reduced nuclear PTEN levels in lung cancer patient samples establishing phosphorylation as a bona fide inactivation mechanism for PTEN in lung cancer. Thus, use of small molecule inhibitors that hinder PTEN phosphorylation is a plausible approach to activate PTEN function in the treatment of lung cancer. Abbreviations AKT V-Akt Murine Thymoma Viral Oncogene CA Cancer adjacent CDK1 Cyclin dependent kinase 1 CENPC-C Centromere Protein C ChIP Chromatin Immunoprecipitation co-IP Co-immunoprecipitation COSMIC Catalog of Somatic Mutations In Cancer CREB cAMP Responsive Element Binding Protein C-tail Carboxy terminal tail E2F1 E2F Transcription Factor 1 ECIS Electric Cell-substrate Impedance Sensing EGFR Epidermal Growth Factor Receptor GSI Gamma Secretase Inhibitor HDAC1 Histone Deacetylase 1 HP1 Heterochromatin protein 1 KAP1/TRIM28 KRAB-Associated Protein 1/Tripartite Motif Containing 28 MAF1 Repressor of RNA polymerase III transcription MAF1 homolog MCM2 Minichromosome Maintenance Complex Component 2 miRNA micro RNA MTF1 Metal-Regulatory Transcription Factor 1 PARP Poly(ADP-Ribose) Polymerase PD-1 Programmed Cell Death 1 PD-L1 Programmed Cell Death 1 Ligand 1 PI3K Phosphatidylinositol-4,5-Bisphosphate 3-Kinase PLK Polo-like Kinase pPTEN Phosphorylated PTEN PTEN Phosphatase and Tensin Homolog deleted on chromosome ten PTM Post Translational Modification Rad51 RAD51 Recombinase Rad52 RAD52 Recombinase RPA1 Replication protein A SILAC Stable Isotope Labeling with Amino Acids in Cell Culture SRF Serum Response Factor TKI Tyrosine Kinase inhbitors TMA Tissue Microarray TOP2A DNA Topoisomerase 2A.