Short-term changes in illumination elicit alterations in thylakoid protein phosphorylation and reorganization of the photosynthetic machinery. Phosphorylation of LHCII, the light-harvesting complex of photosystem II, facilitates its relocation to photosystem I and permits excitation energy redistribution between the photosystems (state transitions). The protein kinase STN7 is required for LHCII phosphorylation and state transitions in the flowering plant Arabidopsis thaliana. LHCII phosphorylation is reversible, but extensive efforts to identify the protein phosphatase(s) that dephosphorylate LHCII have been unsuccessful. Here, we show that the thylakoid-associated phosphatase TAP38 is required for LHCII dephosphorylation and for the transition from state 2 to state 1 in A. thaliana. In tap38 mutants, thylakoid electron flow is enhanced, resulting in more rapid growth under constant low-light regimes. TAP38 gene overexpression markedly decreases LHCII phosphorylation and inhibits state 1-->2 transition, thus mimicking the stn7 phenotype. Furthermore, the recombinant TAP38 protein is able, in an in vitro assay, to directly dephosphorylate LHCII. The dependence of LHCII dephosphorylation upon TAP38 dosage, together with the in vitro TAP38-mediated dephosphorylation of LHCII, suggests that TAP38 directly acts on LHCII. Although reversible phosphorylation of LHCII and state transitions are crucial for plant fitness under natural light conditions, LHCII hyperphosphorylation associated with an arrest of photosynthesis in state 2 due to inactivation of TAP38 improves photosynthetic performance and plant growth under state 2-favoring light conditions.