Epilepsy of progressive myoclonus type 2 gene A (EPM2A) encodes a dual specificity protein phosphatase called Laforin. Laforin is also a tumor suppressor that dephosphorylates GSK3beta at the critical Ser9 position and regulates Wnt signaling. The epilepsy-causing mutations have a deleterious effect on phosphatase activity, regardless of whether they locate in the carbohydrate-binding domain (CBD) at the N terminus or the dual specificity phosphatase domain (DSPD) at the C terminus. How mutations outside the DSPD reduce the phosphatase activity of Laforin remains unexplained. Here we report that Laforin expressed in mammalian cells forms dimers that are highly resistant to SDS treatment. Deleting CBD completely abolished the dimerization and phosphatase activity of Laforin. Moreover, all of the naturally occurring Laforin mutations tested impaired laforin GSK3beta dephosphorylation at Ser9 dimerization, and beta-catenin accumulation in nucleus. Our results demonstrate a critical role of dimerization in Laforin function and suggest an important new dimension in protein phosphatase function and in molecular pathogenesis of Lafora's disease.