E-cadherin is expressed in vestibular, mechanosensory epithelia during early embryonic development. During late embryonic and neonatal stages it is expressed in supporting cells but down-regulated in differentiating sensory hair cells. We used a conditionally immortal cell line (UB/UE-1) from the neonatal mouse utricle to test the hypothesis that constitutive expression of E-cadherin inhibits the progression of hair cell differentiation. Under differentiating culture conditions, transfected E-cadherin inhibited expression of the cytoskeletal protein myosin VIIa and functional expression of both acetylcholine receptors and potassium channels, which are normally expressed by neonatal hair cells. However, it had no effect on the expression of the transcription factor Brn3c or the cytoskeletal protein fimbrin, which are also expressed by neonatal hair cells. The number of adherens junctions increased significantly under differentiating conditions but there was no detectable change in formation of tight junctions or gap junctions. However, E-cadherin expression led to density-dependent cell death under differentiating conditions. We have shown that E-cadherin is expressed in vestibular supporting cells, which form the basis of the sensory epithelium, but that constitutive expression inhibits the full differentiation of hair cells. Down-regulation of E-cadherin is thus likely to be a key element in the regeneration of hair cells.