The budding yeast protein Kip3p is a member of the conserved kinesin-8 family of microtubule motors, which are required for microtubule-cortical interactions, normal spindle assembly and kinetochore dynamics. Here, we demonstrate that Kip3p is both a plus end-directed motor and a plus end-specific depolymerase--a unique combination of activities not found in other kinesins. The ATPase activity of Kip3p was activated by both microtubules and unpolymerized tubulin. Furthermore, Kip3p in the ATP-bound state formed a complex with unpolymerized tubulin. Thus, motile kinesin-8s may depolymerize microtubules by a mechanism that is similar to that used by non-motile kinesin-13 proteins. Fluorescent speckle analysis established that, in vivo, Kip3p moved toward and accumulated on the plus ends of growing microtubules, suggesting that motor activity brings Kip3p to its site of action. Globally, and more dramatically on cortical contact, Kip3p promoted catastrophes and pausing, and inhibited microtubule growth. These findings explain the role of Kip3p in positioning the mitotic spindle in budding yeast and potentially other processes controlled by kinesin-8 family members.