CDKN3 (cyclin-dependent kinase inhibitor 3), a dual specificity protein phosphatase, dephosphorylates cyclin-dependent kinases (CDKs) and thus functions as a key negative regulator of cell cycle progression. Deregulation or mutations of CDNK3 have been implicated in various cancers. However, the role of CDKN3 in Bcr-Abl-mediated chronic myelogenous leukemia (CML) remains unknown. Here we found that CDKN3 acts as a tumor suppressor in Bcr-Abl-mediated leukemogenesis. Overexpression of CDKN3 sensitized the K562 leukemic cells to imanitib-induced apoptosis and dramatically inhibited K562 xenografted tumor growth in nude mouse model. Ectopic expression of CDKN3 significantly reduced the efficiency of Bcr-Abl-mediated transformation of FDCP1 cells to growth factor independence. In contrast, depletion of CDKN3 expression conferred resistance to imatinib-induced apoptosis in the leukemic cells and accelerated the growth of xenograph leukemia in mice. In addition, we found that CDKN3 mutant (CDKN3-C140S) devoid of the phosphatase activity failed to affect the K562 leukemic cell survival and xenografted tumor growth, suggesting that the phosphatase of CDKN3 was required for its tumor suppressor function. Furthermore, we observed that overexpression of CDKN3 reduced the leukemic cell survival by dephosphorylating CDK2, thereby inhibiting CDK2-dependent XIAP expression. Moreover, overexpression of CDKN3 delayed G1/S transition in K562 leukemic cells. Our results highlight the importance of CDKN3 in Bcr-Abl-mediated leukemogenesis, and provide new insights into diagnostics and therapeutics of the leukemia.