The FK506-binding protein 12 (FKBP12) is a cytoplasmic protein and has been reported to possess multiple functions in signaling transduction based on its interaction with different cellular targets. Here, we report that FKBP12 interacts with oncoprotein MDM2 and induces MDM2 degradation. We demonstrate that FKBP12 degrades MDM2 through binding to MDM2 protein, disrupting MDM2/MDM4 interaction and inducing MDM2 self-ubiquitination. The FKBP12-mediated MDM2 degradation was significantly enhanced when the transfected MDM2 was localized in the cytoplasm. The endogenous MDM2, when it was induced by p53 subjecting to DNA-damaging stimuli such as treatment with doxorubicin, was also significantly inhibited by FKBP12. This is due to translocation of p53-induced MDM2 from the nucleus to the cytoplasm, which facilitates interaction with cytoplasmic FKBP12. Furthermore, the enhanced level of MDM2 following p53 activation in nutlin-3 treated cells was also inhibited by FKBP12. The FKBP12-mediated downregulation of MDM2 in response to doxorubicin or nutlin-3 results in continuing and constitutive activation of p53, inhibition of XIAP and sensitization of cancer cells to apoptosis. These results identify a novel function for FKBP12 in downregulating MDM2, which directly enhances sensitivity of cancer cells to chemotherapy and nutlin-3 treatment.