Nuclear exclusion of the PTEN (phosphatase and tensin homologue deleted in chromosome 10) tumour suppressor has been associated with cancer progression^,,,,,. However, the mechanisms leading to this aberrant PTEN localization in human cancers are currently unknown. We have previously reported that ubiquitinylation of PTEN at specific lysine residues regulates its nuclear–cytoplasmic partitioning. Here we show that functional promyelocytic leukaemia protein (PML) nuclear bodies co-ordinate PTEN localization by opposing the action of a previously unknown PTEN-deubiquitinylating enzyme, herpesvirus-associated ubiquitin-specific protease (HAUSP, also known as USP7), and that the integrity of this molecular framework is required for PTEN to be able to enter the nucleus. We find that PTEN is aberrantly localized in acute promyelocytic leukaemia, in which PML function is disrupted by the PML–RARα fusion oncoprotein. Remarkably, treatment with drugs that trigger PML–RARα degradation, such as all-trans retinoic acid or arsenic trioxide, restore nuclear PTEN. We demonstrate that PML opposes the activity of HAUSP towards PTEN through a mechanism involving the adaptor protein DAXX (death domain-associated protein). In support of this paradigm, we show that HAUSP is overexpressed in human prostate cancer and is associated with PTEN nuclear exclusion. Thus, our results delineate a previously unknown PML–DAXX–HAUSP molecular network controlling PTEN deubiquitinylation and trafficking, which is perturbed by oncogenic cues in human cancer, in turn defining a new deubiquitinylation-dependent model for PTEN subcellular compartmentalization.