The oncogenic protein beta-catenin is overexpressed in many cancers, frequently accumulating in nuclei where it forms active complexes with lymphoid enhancer factor-1 (LEF-1)/T-cell transcription factors, inducing genes such as c-myc and cyclin D1. In normal cells, nuclear beta-catenin levels are controlled by the adenomatous polyposis coli (APC) protein through nuclear export and cytoplasmic degradation. Transient expression of LEF-1 is known to increase nuclear beta-catenin levels by an unknown mechanism. Here, we show that APC and LEF-1 compete for nuclear beta-catenin with opposing consequences. APC can export nuclear beta-catenin to the cytoplasm for degradation. In contrast, LEF-1 anchors beta-catenin in the nucleus by blocking APC-mediated nuclear export. LEF-1 also prevented the APC/CRM1-independent nuclear export of beta-catenin as revealed by in vitro assays. Importantly, LEF-1-bound beta-catenin was protected from degradation by APC and axin in SW480 colon cancer cells. The ability of LEF-1 to trap beta-catenin in the nucleus was down-regulated by histone deacetylase 1, and this correlated with a decrease in LEF1 transcription activity. Our findings identify LEF-1 as key regulator of beta-catenin nuclear localization and stability and suggest that overexpression of LEF-1 in colon cancer and melanoma cells may contribute to the accumulation of oncogenic beta-catenin in the nucleus.