In addition to their role in programmed cell death, caspases exert non-lethal functions in diverse developmental processes including cell differentiation or tissue remodeling. Terminal cell cycle exit and differentiation can be promoted by increased level of the CDK inhibitor p27(Kip1). Activated caspases cause proteolytic processing of p27, and we identified a novel caspase cleavage site in human p27 that removes a C-terminal fragment of 22 amino acids from the CDK inhibitor, including a phosphodegron. Thereby, caspases protect the inhibitor from SCF-Skp2-mediated degradation in S, G2 and M phases of the cell cycle. As a consequence, p27 becomes stabilized and remains an efficient nuclear inhibitor of cell cycle progression. Besides controlling cyclin/CDK kinase activity, p27 also regulates cytoskeletal dynamics, cell motility and cell invasion. Following processing by caspases, p27 fails to bind to RhoA and to inhibit its activation, and thereby abolishes the ability of p27 to stimulate cell migration and invasion. We propose that the stabilization of the CDK inhibitor and elimination of RhoA-induced cytoskeletal remodeling upon caspase processing could contribute to cell cycle exit and cytoskeletal remodeling during non-lethal caspase controlled differentiation processes.