Adenomatous polyposis coli gene product (APC) functions as a tumor suppressor and its mutations in familial adenomatous polyposis and colorectal cancers lead to the accumulation of cytoplasmic beta-catenin. The molecular mechanism by which APC regulates the stability of beta-catenin was investigated. The central region of APC, APC-(1211-2075), has the beta-catenin- and Axin-binding sites and down-regulates beta-catenin. Glycogen synthase kinase-3 beta (GSK-3 beta) phosphorylated beta-catenin slightly in the presence of either APC-(1211-2075) or Axin(delta)(beta)(-catenin), in which the beta-catenin-binding site is deleted, and greatly in the presence of both proteins. The enhancement of the GSK-3 beta-dependent phosphorylation of beta-catenin was eliminated by the APC-binding site of Axin. Axin down-regulated beta-catenin in SW480 cells, but not Axin(delta)(beta)(-catenin). In L cells where APC is intact, Axin(delta)(beta)(-catenin) inhibited Wnt-dependent accumulation of beta-catenin but not Axin-(298-832)(delta)(beta)(-catenin) in which the APC- and beta-catenin-binding sites are deleted. These results indicate that the complex formation of APC and Axin enhances the phosphorylation of beta-catenin by GSK-3 beta, leading to the down-regulation of beta-catenin.