Dynactin is a multi-subunit complex implicated in cytoplasmic dynein-driven transport of membranous organelles, mitotic chromosomes and other cargos. The p150Glued subunit of dynactin contains a microtubule (MT)-binding domain composed of a CAP-Gly motif and an adjacent basic domain (BD). Despite the widespread conservation of this structure, the requirement for MT-binding remains controversial. To test the hypothesis that MT-binding is important for transport, we engineered mutants that disrupt normal MT-binding and developed a shRNA/rescue assay to replace endogenous p150Glued with each mutant. Assaying ER-Golgi transport first, wild-type GFP-p150Glued was successful in rescuing normal motility. In contrast, a GFP-p150Glued G59S mutant that displays reduced MT-binding incorporated into the dynactin complex but failed to rescue normal ER-Golgi transport. To test if dynamic MT-binding was required, we generated a GFP-p150Glued-MAP4 chimera which exhibited stable MT binding. This construct also failed to rescue ER-Golgi transport but resulted in immobilization of vesicles along MTs. To test the contribution of the BD, a naturally occurring p150Glued isoform with an internal deletion in the BD was prepared. This construct was successful in rescuing ER-Golgi transport but displayed reduced run-lengths for motile vesicles. Because dynactin is also thought to augment dynein-driven chromosome movement during mitosis, we applied the same shRNA/rescue approach to assay kinetochore-MT capture, chromosome movement, and the timing of anaphase onset. Whereas wild-type GFP-p150Glued rescued each aspect of mitotic dynactin function, the G59S mutant disrupted kinetochore-MT capture similar to cells treated with nocodazole. A subset of G59S-rescued cells entered anaphase despite a loss of persistent kinetochore-MT attachments, reflecting a defect in the spindle assembly checkpoint. Together these studies suggest that the MT-binding activity of p150Glued is essential during both interphase and mitosis.