beta-Catenin is essential for the function of cadherins, a family of Ca2+-dependent cell-cell adhesion molecules, by linking them to (alpha)-catenin and the actin cytoskeleton. beta-Catenin also binds to adenomatous polyposis coli (APC) protein, a cytosolic protein that is the product of a tumor suppressor gene mutated in colorectal adenomas. We have expressed mutant beta-catenins in MDCK epithelial cells to gain insights into the regulation of beta-catenin distribution between cadherin and APC protein complexes and the functions of these complexes. Full-length beta-catenin, beta-catenin mutant proteins with NH2-terminal deletions before (deltaN90) or after (deltaN131, deltaN151) the alpha-catenin binding site, or a mutant beta-catenin with a COOH-terminal deletion (delta C) were expressed in MDCK cells under the control of the tetracycline-repressible transactivator. All beta-catenin mutant proteins form complexes and colocalize with E-cadherin at cell-cell contacts; deltaN90, but neither deltaN131 nor deltaN151, bind alpha-catenin. However, beta-catenin mutant proteins containing NH2-terminal deletions also colocalize prominently with APC protein in clusters at the tips of plasma membrane protrusions; in contrast, full-length and COOH-terminal-deleted beta-catenin poorly colocalize with APC protein. NH2-terminal deletions result in increased stability of beta-catenin bound to APC protein and E-cadherin, compared with full-length beta-catenin. At low density, MDCK cells expressing NH2-terminal-deleted beta-catenin mutants are dispersed, more fibroblastic in morphology, and less efficient in forming colonies than parental MDCK cells. These results show that the NH2 terminus, but not the COOH terminus of beta-catenin, regulates the dynamics of beta-catenin binding to APC protein and E-cadherin. Changes in beta-catenin binding to cadherin or APC protein, and the ensuing effects on cell morphology and adhesion, are independent of beta-catenin binding to alpha-catenin. These results demonstrate that regulation of beta-catenin binding to E-cadherin and APC protein is important in controlling epithelial cell adhesion.