MdmX and Mdm2 regulate p53 tumor suppressor functions by controlling p53 transcriptional activity and/or stability in cells exposed to DNA damage. Accumulating evidence indicates that ATM-mediated phosphorylation and degradation of Mdm2 and MdmX may be the initial driving force that induces p53 activity during the early phase of the DNA damage response. We have recently determined that a novel protein phosphatase, Wip1 (or PPM1D), contributes to p53 regulation by dephosphorylating Mdm2 to close the p53 activation loop initiated by the ATM/ATR kinases. In the present study, we determine that Wip1 directly dephosphorylates MdmX at the ATM-targeted Ser403 and indirectly suppresses phosphorylation of MdmX at Ser342 and Ser367. Wip1 inhibits the DNA damage-induced ubiquitination and degradation of MdmX, leading to the stabilization of MdmX and reduction of p53 activities. Our data suggest that Wip1 is an important component in the ATM-p53-MdmX regulatory loop.