Tumor suppressor SMAR1 is known to be involved in regulation of cell cycle and apoptotic genes transcription. It also directly interacts and stabilizes p53 through phosphorylation at serine-15 residue. Although the functions of SMAR1 are mainly restricted to the nucleus, we report its novel function with the cytoplasm. We show that SMAR1 directly interacts and inhibits AKR1a4 enzyme activity. Interestingly, AKR1a4 enzyme activity is elevated in higher grades of breast cancer where SMAR1 expression is drastically downregulated. Higher AKR1a4 activity protects the cancer cells from anticancer drugs and free radical stress. Through increased metabolism, ARK1a4 helps fulfilling higher energy needs required by cancer cell. The present study delineates yet another facet of tumor suppressor activity of SMAR1 in the cytoplasm. We also depict that upon stress, ATM kinase leads to dissociation of SMAR1-AKR1a4 complex through nuclear translocation of SMAR1 causing elevated AKR1a4 activity. Nuclear SMAR1 causes cell cycle arrest giving ample time for DNA damage repair, while AKR1a4 scavenges the excess free radicals which may further cause DNA damage. Thus, we propose a novel mechanism of regulation of oxidative stress by ATM through modulation of SMAR1-AKR1a4 complex. Further, we show that a small peptide derived from SMAR1 induces free radical stress by inhibiting AKR1a4 enzyme activity, which can be a potential anticancer therapeutic agent.