The kinesin-8 family of microtubule motors plays a critical role in microtubule length control in cells. These motors have complex effects on microtubule dynamics: they destabilize growing microtubules yet stabilize shrinking microtubules. The budding yeast kinesin-8, Kip3, accumulates on plus ends of growing but not shrinking microtubules. Here we identify an essential role of the tail domain of Kip3 in mediating both its destabilizing and its stabilizing activities. The Kip3 tail promotes Kip3's accumulation at the plus ends and facilitates the destabilizing effect of Kip3. However, the Kip3 tail also inhibits microtubule shrinkage and is required for promoting microtubule rescue by Kip3. These effects of the tail domain are likely to be mediated by the tubulin- and microtubule-binding activities that we describe. We propose a concentration-dependent model for the coordination of the destabilizing and stabilizing activities of Kip3 and discuss its relevance to cellular microtubule organization.