Deregulation of cellular-signaling pathways by the inactivation of tumor-suppressor genes is one of the major causes of hepatocellular carcinoma (HCC). In this study, we identified Tax1 binding protein 2 (TAX1BP2) as a novel tumor-suppressor gene in HCC. TAX1BP2 transcript was frequently underexpressed (42.2% with T/NT <0.5; P < 0.03) in HCCs, and underexpression of TAX1BP2 was associated with poorer overall survival rates in patients after surgical resection. An effector domain (ED) for TAX1BP2 tumor-suppressor activity was mapped to the amino-acid residues 267-756. Transient or stable expression of either full-length or ED of TAX1BP2 significantly suppressed HCC cell tumorigenicity through the activation of the p38/p53/p21 pathway. In contrast, silencing of TAX1BP2 by short interfering RNA remarkably suppressed the activation of the p38/p53/p21 pathway. Finally, phosphorylation of TAX1BP2 at serine-763 by cyclin-dependent kinase (CDK)2 abolished the TAX1BP2-mediated p38 activation and tumor-suppressive activity, indicating that TAX1BP2 can adapt CDK2 signaling to the p38/p53/p21 pathway. Conclusion: Taken together, our data provide the first evidence that TAX1BP2 is a CDK2-regulated tumor-suppressor gene in HCC and is a novel activator of the p38/p53/p21 pathway. (HEPATOLOGY 2012;56:1770–1781)