The TGF‐β type V receptor (TβR‐V) mediates growth inhibition by IGFBP‐3 and TGF‐β in epithelial cells and loss of TβR‐V expression in these cells leads to development of carcinoma. The mechanisms by which TβR‐V mediates growth inhibition (tumor suppressor) signaling remain elusive. Previous studies revealed that IGFBP‐3 and TGF‐β inhibit growth in epithelial cells by stimulating TβR‐V‐mediated IRS‐1/2‐dependent activation and cytoplasm‐to‐nucleus translocation of IGFBP‐3‐ or TGF‐β‐stimulated protein phosphatase (PPase), resulting in dephosphorylation of pRb‐related proteins (p107, p130) or pRb, and growth arrest. To define the signaling, we characterized/identified the IGFBP‐3‐ and TGF‐β‐stimulated PPases in cell lysates and nucleus fractions in Mv1Lu cells treated with IGFBP‐3 and TGF‐β, using a cell‐free assay with 32P‐labeled casein as a substrate. Both IGFBP‐3‐ and TGF‐β‐stimulated PPase activities in cell lysates are abolished when cells are co‐treated with TGF‐β/IGFBP‐3 antagonist or RAP (LRP‐1/TβR‐V antagonist). However, the IGFBP‐3‐stimulated PPase activity, but not TGF‐β‐stimulated PPase activity, is sensitive to inhibition by okadaic acid (OA). In addition, OA or PP2Ac siRNA reverses IGFBP‐3 growth inhibition, but not TGF‐β growth inhibition, in Mv1Lu and 32D cells. These suggest that IGFBP‐3‐ and TGF‐β‐stimulated PPases are identical to PP2A and PP1, respectively. By Western blot/phosphorimager/immunofluorescence‐microscopy analyses, IGFBP‐3 and TGF‐β stimulate TβR‐V‐mediated IRS‐2‐dependent activation and cytoplasm‐to‐nucleus translocation of PP2Ac and PP1c, resulting in dephosphorylation of p130/p107 and pRb, respectively, and growth arrest. Small molecule TGF‐β enhancers, which potentiate TGF‐β growth inhibition by enhancing TβR‐I–TβR‐II‐mediated canonical signaling and thus activating TβR‐V‐mediated tumor suppressor signaling cascade (TβR‐V/IRS‐2/PP1/pRb), could be used to prevent and treat carcinoma.