Beta-catenin plays a dual role as an adhesion molecule in adherens junctions at the plasma membrane and as a key intermediate in the canonical Wnt signalling pathway. The cytosolic soluble pool of beta-catenin, involved in the transmission of the Wnt signal, is normally subjected to rapid protein degradation. On activation of the Wnt cascade, beta-catenin becomes stabilized and then translocates into the nucleus where it co-activates transcription factors of the TCF (T-cell factor)/LEF (lymphoid enhancer factor) family. The expression of plasma membrane-targeted forms of beta-catenin has been shown to also activate TCF/LEF-dependent transcription and different mechanisms have been put forward. In the present study, we have undertaken a systematic analysis of the signalling capability of non-degradable forms of beta-catenin targeted to different cellular compartments. beta-Catenin targeted to the plasma membrane activated transcription to a greater extent compared with non-targeted beta-catenin, and led to a marked stabilization of cytosolic soluble beta-catenin. These effects were independent of the competition with endogenous beta-catenin for binding to E-cadherin at the plasma membrane, since targeting non-degradable beta-catenin to other cellular compartments, i.e. the outer mitochondrial membrane and the endoplasmic reticulum membrane, also resulted in the accumulation of cytosolic wild-type beta-catenin and activation of beta-catenin-dependent signalling. In contrast, nuclear-targeted beta-catenin was without significant effect on cytosolic wild-type beta-catenin and did not activate transcription. Our results suggest that cytosolic accumulation of beta-catenin is a prerequisite for the activation of TCF/LEF-dependent transcription in the nucleus.