Spatial regulation of the tumor suppressor PTEN is exerted through alternative plasma membrane, cytoplasmic, and nuclear subcellular locations. The N-terminal region of PTEN is important for the control of PTEN subcellular localization and function. It contains both an active nuclear localization signal (NLS) and an overlapping PIP2-binding motif (PBM) involved in plasma membrane targeting. We report a comprehensive mutational and functional analysis of the PTEN N-terminus, including a panel of tumor-related mutations at this region. Nuclear/cytoplasmic partitioning in mammalian cells and PIP3 phosphatase assays in reconstituted S. cerevisiae defined categories of PTEN N-terminal mutations with distinct PIP3 phosphatase and nuclear accumulation properties. Noticeably, most tumor-related mutations that lost PIP3 phosphatase activity also displayed impaired nuclear localization. Cell proliferation and soft-agar colony formation analysis in mammalian cells of mutations with distinctive nuclear accumulation and catalytic activity patterns suggested a contribution of both properties to PTEN tumor suppressor activity. Our functional dissection of the PTEN N-terminus provides the basis for a systematic analysis of tumor-related and experimentally engineered PTEN mutations.