The tumour suppressor p53 has evolved a MDM2-dependent feedback loop that has a dual role as either a stimulator of p53 protein translation through mRNA binding or a stimulator of p53 protein degradation through the ubiquitin-proteasome system. A unique pseudo-substrate motif or “lid” in MDM2 is adjacent to its N-terminal hydrophobic drug-binding pocket and we have evaluated whether the lid of MDM2 is a physiological regulator of this dual function of MDM2. Deletion of this flexible pseudosubstrate motif inhibits MDM2 indicating that this peptide stretch can function as a positive regulatory motif. Phospho-mimetic mutation in the pseudo-substrate motif at codon 17 (MDM2S17D) stabilizes the binding of MDM2 towards p53. Molecular modeling orientates the pseudo-substrate motif over a charged surface patch on the MDM2 surface at Arg97/Lys98 and mutation of these residues to the MDM4 equivalent reverses the activating effect of the phosphomimetic mutation. Transient or inducible low level expression of MDM2WT can promote an increase in p53 protein steady-state levels whilst the expression of MDM2S17D in cells results in p53 protein de-stabilization. Phospho-specific antibodies to the MDM2 lid demonstrate two physiological conditions that alter lid phosphorylation: (i) lid hypo-phosphorylation occurs after DNA damage where p53 protein is stabilized and (ii) lid hyper-phosphorylation occurs at high cell density under conditions where p53 protein is de-stabilized. Expression of MDM2S17D in cells also de-stabilizes hyperubiquitinated mutant p53 under conditions where MDM2WT has no effect on mutant p53 protein degradation. The lid functions as a flexible regulatory motif whose phosphorylation switches MDM2 from a synthesis mode to a degradation mode with implications for defining the physiological signals that control the MDM2-p53 feedback regulatory loop.