The epithelial-mesenchymal transition (EMT) is an embryonic program frequently reactivated during cancer progression and is implicated in cancer invasion and metastasis. Cancer cells can also acquire stem cell properties to self-renew and give rise to new tumors through the EMT. Inactivation of the tumor suppressor PTEN has been shown to induce the EMT, but the underlying molecular mechanisms are less understood. In this study, we reconstituted PTEN-deficient breast cancer cells with wild-type and mutant PTEN, demonstrating that restoration of PTEN expression converted cancer cells with mesenchymal traits to an epithelial phenotype and inhibited cancer stem cell (CSC) activity. The protein rather than the lipid phosphatase activity of PTEN accounts for the reversal of the EMT. PTEN dephosphorylates and downregulates Abi1 in breast cancer cells. Gain- and loss-of-function analysis indicates that upregulation of Abi1 mediates PTEN loss-induced EMT and CSC activity. These results suggest that PTEN may suppress breast cancer invasion and metastasis via dephosphorylating and downregulating Abi1.