PTEN is a potent tumor-suppressor protein. Aggressive and metastatic prostate cancer (PC) is associated with a reduction or loss of PTEN expression. PTEN reduction often occurs without gene mutations, and its downregulation is not fully understood. Herein, we show that PTEN is incorporated in the cargo of exosomes derived from cancer cells. PTEN is not detected in exosomes derived from normal, noncancerous cells. We found that PTEN can be transferred to other cells through exosomes. In cells that have a reduction or complete loss of PTEN expression, the transferred PTEN is competent to confer tumor-suppression activity to acceptor cells. In PC patients, we show that PTEN is incorporated in the cargo of exosomes that circulate in their blood. Interestingly, normal subjects have no PTEN expression in their blood exosomes. Further, we found that the prostate-specific antigen (PSA) is incorporated in PC patients’ and normal subjects’ blood exosomes. These data suggest that exosomal PTEN can compensate for PTEN loss in PTEN deficient cells, and may have diagnostic value for prostate cancer.