The assembly, disassembly and dynamic movement of macromolecules are integral to cell physiology. The ubiquitin-selective chaperone Cdc48 (p97 in Metazoa), an AAA-ATPase, might facilitate such processes in the cell cycle. Cdc48 in budding yeast was initially isolated from a mitotic mutant. However, its function in mitosis remained elusive. Here we show that the temperature-sensitive cdc48-3 mutant and depletion of cofactor Shp1 (p47 in Metazoa) cause cell-cycle arrest at metaphase. The arrest is due to a defect in bipolar attachment of the kinetochore that activates the spindle checkpoint. Furthermore, Cdc48-Shp1 positively regulates Glc7/protein phosphatase 1 by facilitating nuclear localization of Glc7, whereas it opposes Ipl1/Aurora B kinase activity. Thus, we propose that Cdc48-Shp1 promotes nuclear accumulation of Glc7 to counteract Ipl1 activity. Our results identify Cdc48 and Shp1 as critical components that balance the kinase and phosphatase activities at the kinetochore in order to achieve stable bipolar attachment.