Murine double minute-2 protein (Mdm2) is a multifaceted phosphorylated protein that plays a role in regulating numerous proteins including the tumor suppressor protein p53. Mdm2 binds to and is involved in conjugating either ubiquitin or Nedd8 (Neural precursor cell expressed, developmentally down-regulated 8) to p53. Although regulation of the E3 ubiquitin activity of Mdm2 has been investigated, regulation of the neddylating activity of Mdm2 remains to be defined. Here we show that activated c-Src kinase phosphorylates Y281 and Y302 of Mdm2, resulting in an increase in Mdm2 stability and its association with Ubc12, the E2 enzyme of the neddylating complex. Mdm2-dependent Nedd8 conjugation of p53 results in transcriptionally inactive p53, a process that is reversed with a small molecule inhibitor to either Src or Ubc12. Thus, our studies reveal how Mdm2 may neutralize and elevate p53 in actively proliferating cells and also provides a rationale for using therapies that target the Nedd8 pathway in wild-type p53 tumors.