DNA mismatch repair (MMR) is a critical genome-maintenance system. It ensures genome stability by correcting mismatches generated during DNA replication, suppressing homologous recombination, and inducing apoptosis in response to severe DNA damage. As a result, defects in MMR lead to genome-wide mutations and susceptibility to both hereditary and sporadic cancer syndromes. The hallmark of cancer cells defective in MMR is their ability to display frequent instability in simple repetitive DNA sequences, a phenomenon called microsatellite instability (MSI). However, only ~70% of the MSI-positive tumors have identifiable MMR gene mutations, indicating that additional factor(s) are responsible for the MSI phenotype in the remaining 30% MSI-tumors. We demonstrate here that phosphorylation of proliferating cell nuclear antigen (PCNA), an MMR component required for the initiation and resynthesis steps of the repair reactions, blocks in vitro MMR. We found that nuclear extracts derived from colorectal cell lines containing high levels of phosphorylated PCNA are not only defective in MMR, but also inhibitory to MMR activity in HeLa extracts. To determine if PCNA phosphorylation inhibits MMR, several PCNA isoforms that mimic phosphorylated or non-phosphorylated PCNA were examined for their effects on MMR activity. We show that all phosphorylated PCNA mimics block MMR at the initiation step but MMR was not affected by the non-phosphorylated mimetic PCNA. In vitro gap-filling experiments reveal that the phosphorylated PCNA induces a mutational frequency several fold higher than non-phosphorylated PCNA. Since PCNA has been shown to interact with MMR initiation factors MutSα and MutLα, we examined the interactions of phosphorylated PCNA with these two initiation factors. Interestingly, PCNA phosphorylation reduces the PCNA-MutSα interaction, but not the PCNA-MutLα interaction. Since PCNA is proposed to transfer MutSα to the mismatch site, the simplest explanation of the result is that PCNA phosphorylation inhibits MMR by blocking MutSα-mismatch binding activity. Taken together, our results reveal that PCNA phosphorylation induces genetic instability by inhibiting MMR at the initiation step and by promoting DNA polymerase-catalyzed mis-incorporations. This study provides a novel mechanism by which posttranslational modifications inhibit MMR, leading to genome instability and tumorigenesis. A second part of the study is to determine MMR function of several MutLα mutants associated with relapse leukemia patients. One of the mutants contains a phenylalanine99 to leucine substitution in the MLH1 subunit of MutLα. We show that this mutation inhibits MMR by blocking both the ATPase activity and the endonuclease activity associated with MutLα, supporting the importance of the MutLα ATPase and the endonuclease activities in MMR.