The NF-κB growth pathway is constitutively activated in many cancers but its activation mechanism is unclear in most cases. We show that PHLPP2 interacts with IKKβ kinase, decreases its phosphorylation and the subsequent NF-κB activation in cancer cells. PHLPP2 is progressively lost in glioma and colorectal cancer and acts as a bona fide tumor suppressor, depending on IKKβ expression in cells. Physiologically, IKKβ activation by growth factors requires the formation of the Bcl10-MALT1 ubiquitin-ligase complex leading to NEMO/IKKγ non-degradative ubiquitination and IKKβ phosphorylation. PHLPP2 opposes the formation of this complex through interaction with Bcl10 and competitive displacement of MALT1 from Bcl10. Conversely, PHLPP2 loss enhances Bcl10-MALT1 complex formation, NEMO ubiquitination and subsequent IKKβ phosphorylation, resulting in increased NF-κB-dependent transcription of multiple target genes. Our results reveal PHLPP2 as a new biomarker of cancer progression, and implicate it as major negative regulator of NF-κB signaling.