We show that tyrosine phosphorylation, produced by incubation of normal human keratinocytes with the tyrosine phosphatase inhibitor peroxovanadate, directly and reversibly regulates the association of beta-catenin and plakoglobin with E-cadherin and alpha-catenin. Prior studies have demonstrated a correlative, but not causal, association between increased tyrosine phosphorylation and decreased adherens junction mediated cell-cell adhesion. We observed that (i) binding of tyrosine phosphorylated beta-catenin and plakoglobin to E-cadherin and to alpha-catenin was substantially reduced, but could be restored in vitro by removal of phosphate from beta-catenin and plakoglobin with added tyrosine phosphatase, and (ii) tyrosine phosphorylation of beta-catenin and plakoglobin was associated with decreased cell-cell adhesion. These findings support a direct and causal role for tyrosine phosphorylation of beta-catenin and plakoglobin in regulating adherens junction mediated cell-cell adhesion. We propose that tyrosine phosphorylation of specific and probably different residues is responsible for regulating the binding of beta-catenin or plakoglobin to (i) E-cadherin and (ii) alpha-catenin. Additionally, because beta-catenin and plakoglobin have both structural and regulatory functions, the data raise the possibility that beta-catenin or plakoglobin released from the adherens junctions by tyrosine phosphorylation may transduce a signal to the nucleus regarding the adhesive state of the cell.