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β-arrestin2 is well known for its roles in desensitization and sequestration of G protein-coupled receptors.Here we report that the subcellular localization and function of β-arrestin2 is tightly regulated by Mdm2 E3 ligase activity.Inhibition of Mdm2 E3 ligase activity either by expressing Mdm2 RING finger mutants or using specific Mdm2 E3 ligase inhibitor is sufficient to stabilize the Mdm2/β-arrestin2 complex and cause abnormal nuclear localization of β-arrestin2.Next we demonstrate that lysine residues at position 11 and 12 of β-arrestin2 are required for the interaction between Mdm2 RING finger mutant Mdm2H457S and β-arrestin2, mutation of which prevents Mdm2H457S/β-arrestin2 interaction and subsequent nuclear localization of β-arrestin2.Finally, β-arrestin2-dependent signalings, such as receptor internalization and extracellular signal-regulated protein kinase activation, are found to be impaired once the β-arrestin2 is sequestered in the nuclei by Mdm2H457S.Our findings depict the essential role of Mdm2 E3 ligase activity in determining β-arrestin2 subcellular localization and corresponding signaling.