We have characterized the CDC14 gene, which encodes a dual-specificity protein phosphatase in Candida albicans, and demonstrated that its deletion results in defects in cell separation, mitotic exit and morphogenesis. The C. albicans cdc14delta mutants formed large aggregates of cells that resembled those found in ace2-null strains. In cdc14delta cells, expression of Ace2p target genes was reduced and Ace2p did not accumulate specifically in daughter nuclei. Taken together, these results imply that Cdc14p is required for the activation and daughter-specific nuclear accumulation of Ace2p. Consistent with a role in cell separation, Cdc14p was targeted to the septum region during the M-G1 transition in yeast-form cells. Interestingly, hypha-inducing signals abolished the translocation of Cdc14p to the division plate, and this regulation depended on the cyclin Hgc1p, since hgc1delta mutants were able to accumulate Cdc14p in the septum region of the germ tubes. In addition to its role in cytokinesis, Cdc14p regulated mitotic exit, since synchronous cultures of cdc14delta cells exhibited a severe delay in the destruction of the mitotic cyclin Clb2p. Finally, deletion of CDC14 resulted in decreased invasion of solid agar medium and impaired true hyphal growth.