PTP1B plays a key role in developing different types of cancer. However, the molecular mechanism underlying this effect is unclear. To identify molecular targets of PTP1B that mediate its role in tumorigenesis, we undertook a SILAC-based phosphoproteomic approach, which allowed us to identify Cdk3 as a novel PTP1B substrate. Substrate trapping experiments and docking studies revealed stable interactions between the PTP1B catalytic domain and Cdk3. In addition, we observed that PTP1B dephosphorylates Cdk3 at tyrosine residue 15 in vitro and interacts with it in human glioblastoma cells. Next, we found that pharmacological inhibition of PTP1B or its depletion with siRNA leads to cell cycle arrest with diminished activity of Cdk3, hypophosphorylation of Rb, and the downregulation of E2F target genes Cdk1, Cyclin A, and Cyclin E1. Finally, we observed that the expression of a constitutively active Cdk3 mutant bypasses the requirement of PTP1B for cell cycle progression and expression of E2F target genes. These data delineate a novel signaling pathway from PTP1B to Cdk3 required for efficient cell cycle progression in an Rb-E2F dependent manner in human GB cells.