Abstract Background The acquisition of proliferative and invasive phenotypes is considered a hallmark of neoplastic transformation; however, the underlying mechanisms are less well known. Lipid phosphate phosphatase-3 (LPP3) not only catalyzes the dephosphorylation of the bioactive lipid sphingosine-1-phosphate (S1P) to generate sphingosine but also may regulate embryonic development and angiogenesis via the Wnt pathway. The goal of this study was to determine the role of LPP3 in tumor cells. Results We observed increased expression of LPP3 in glioblastoma primary tumors and in U87 and U118 glioblastoma cell lines. We demonstrate that LPP3-knockdown inhibited both U87 and U118 glioblastoma cell proliferation in culture and tumor growth in xenograft assays. Biochemical experiments provided evidence that LPP3-knockdown reduced β-catenin, CYCLIN-D1, and CD133 expression, with a concomitant increase in phosphorylated β-catenin. In a converse experiment, the forced expression of LPP3 in human colon tumor (SW480) cells potentiated tumor growth via increased β-catenin stability and CYCLIN-D1 synthesis. In contrast, elevated expression of LPP3 had no tumorigenic effects on primary cells. Conclusions These results demonstrate for the first time an unexpected role of LPP3 in regulating glioblastoma progression by amplifying β-catenin and CYCLIN-D1 activities.