Receptor tyrosine kinase EphB3 is expressed in cells in the bottom of intestinal crypts near stem cell niches. Loss of Ephb3 has recently been reported to produce invasive colorectal carcinoma in Apc(Min/+) mice and EphB-mediated compartmentalization was demonstrated to be a mechanism suppressing colorectal cancer progression; however, it is unknown whether other factors contribute to EphB-mediated tumor suppression. EphA4-ephrin-A and EphB4-ephrin-B2 signaling have been reported to promote mesenchymal-to-epithelial transition (MET). Here, we examine whether EphB3-ephrin-B interaction has a similar effect and investigate its role in tumor suppression. We found in a clinical cohort that EphB3 expression was significantly reduced in advanced Dukes' stage tumor specimens, so we over-expressed EphB3 in HT-29 cells by stable transfection. EphB3 over-expression inhibited HT-29 growth in monolayer cultures, anchorage-independent growth in soft agar and xenograft growth in nude mice and initiated morphological, behavioral and molecular changes consistent with MET. Specifically, EphB3 over-expression re-organized cytoskeleton (converting spreading cells to a cobble-like epithelial morphology, patterning cortical actin cytoskeleton and polarizing E-cadherin and ZO-1), induced functional changes favoring MET (decreased transwell migration, increased apoptosis and Ca(2+)-dependent cell-cell adhesion), decreased mesenchymal markers (fibronectin and nuclear beta-catenin), increased epithelial markers (ZO-1, E-cadherin and plakoglobin) and inactivated CrkL-Rac1, a known epithelial-to-mesenchymal transition signaling pathway. Additionally, cross talk from Wnt signaling potentiated the restoration of epithelial cell polarity. Noteworthily, the same factors contributing to MET, owing to EphB3 signaling, also facilitated tumor suppression. We conclude that EphB3-ephrin-B interaction promotes MET by re-establishing epithelial cell-cell junctions and such an MET-promoting effect contributes to EphB3-mediated tumor suppression.