Tumor development from an early lesion through to invasive disease is not a clearly defined progression in the breast. Studies of invasive lobular carcinoma have reported mutations, loss of heterozygosity (LOH) and loss of protein expression in epithelial (E)-cadherin, a protein involved in cell adhesion. Our study examines in situ lobular neoplastic lesions without concurrent invasive carcinoma for E-cadherin gene alterations and protein expression, beta-catenin, alpha-catenin and p120-catenin protein expression, and LOH at the chromosome 16q locus, with the goal of determining the events occurring at the stage of lobular neoplasia. In all, 13 atypical lobular hyperplasia lesions and 13 lobular carcinoma in situ lesions from archived cases were examined. E-cadherin sequence alterations were evaluated using single strand conformation polymorphism and DNA sequencing, and PCR-based LOH analysis was carried out for the 16q locus. Using immunohistochemistry, we assessed protein expression. A total of 23 of 24 lesions evaluated by immunohistochemistry were negative for both E-cadherin and beta-catenin protein expression, and 21 of 23 lesions were negative for alpha-catenin. Cytoplasmic (rather than membrane) localization of p120-catenin was observed in 20 of 21 cases. Lobular carcinoma in situ cases were characterized by mutations; however, atypical lobular hyperplasia cases were not. LOH at 16q was an infrequent event. From our study, we conclude that an altered E-cadherin adhesion complex is an early event affecting atypical lobular hyperplasia as well as lobular carcinoma in situ and occurs prior to progression to invasive disease. However, the loss of protein expression is accompanied by E-cadherin DNA alterations in lobular carcinoma in situ but not in atypical lobular hyperplasia. These cases lacking both protein expression and gene alterations suggest that another mechanism is involved, possibly as early as at the hyperplastic stage, causing silencing of the E-cadherin complex.