Significance Ras/extracellular signal-regulated kinase (ERK) signaling is implicated in human cancer development and progression. ERK activation also results in the expression of MAP kinase phosphatases (MKPs) that inactivate ERK. However, it is currently unclear how MKPs regulate the oncogenic potential of the Ras/ERK pathway. Using knockout mice, we identify the MKP encoded by dual-specificity phosphatase 5 (DUSP5) as both a key regulator of nuclear ERK activity and a tumor suppressor in the DMBA/TPA model of Harvey Ras (HRas)-induced skin carcinogenesis. DUSP5 loss results in increased HRas/ERK-inducible SerpinB2 expression, which causes increased skin cancer sensitivity. Our results establish a key role for DUSP5 in the regulation of oncogenic ERK signaling and suggest that this enzyme may play a wider role in tumors containing activated Ras. Ectopic expression of dual-specificity phosphatase 5 (DUSP5), an inducible mitogen-activated protein (MAP) kinase phosphatase, specifically inactivates and anchors extracellular signal-regulated kinase (ERK)1/2 in the nucleus. However, the role of endogenous DUSP5 in regulating the outcome of Ras/ERK kinase signaling under normal and pathological conditions is unknown. Here we report that mice lacking DUSP5 show a greatly increased sensitivity to mutant Harvey-Ras (HRas Q⁶¹ᴸ)-driven papilloma formation in the 7,12-Dimethylbenzaanthracene/12-O-tetradecanoylphorbol-13-acetate (DMBA/TPA) model of skin carcinogenesis. Furthermore, mouse embryo fibroblasts (MEFs) from DUSP5 ⁻/⁻ mice show increased levels of nuclear phospho-ERK immediately after TPA stimulation and fail to accumulate total ERK in the nucleus compared with DUSP5 ⁺/⁺ cells. Surprisingly, a microarray analysis reveals that only a small number of Ras/ERK-dependent TPA-responsive transcripts are up-regulated on deletion of DUSP5 in MEFs and mouse skin. The most up-regulated gene on DUSP5 loss encodes SerpinB2, an inhibitor of extracellular urokinase plasminogen activator and deletion of DUSP5 acts synergistically with mutant HRas Q⁶¹ᴸ and TPA to activate ERK-dependent SerpinB2 expression at the transcriptional level. SerpinB2 has previously been implicated as a mediator of DMBA/TPA-induced skin carcinogenesis. By analyzing DUSP5 ⁻/⁻, SerpinB2 ⁻/⁻ double knockout mice, we demonstrate that deletion of SerpinB2 abrogates the increased sensitivity to papilloma formation seen on DUSP5 deletion. We conclude that DUSP5 performs a key nonredundant role in regulating nuclear ERK activation, localization, and gene expression. Furthermore, our results suggest an in vivo role for DUSP5 as a tumor suppressor by modulating the oncogenic potential of activated Ras in the epidermis.