p120(ctn) is a catenin whose direct binding to the juxtamembrane domain of classical cadherins suggests a role in regulating cell-cell adhesion. The juxtamembrane domain has been implicated in a variety of roles including cadherin clustering, cell motility, and neuronal outgrowth, raising the possibility that p120 mediates these activities. We have generated minimal mutations in this region that uncouple the E-cadherin-p120 interaction, but do not affect interactions with other catenins. By stable transfection into E-cadherin-deficient cell lines, we show that cadherins are both necessary and sufficient for recruitment of p120 to junctions. Detergent-free subcellular fractionation studies indicated that, in contrast to previous reports, the stoichiometry of the interaction is extremely high. Unlike alpha- and beta-catenins, p120 was metabolically stable in cadherin-deficient cells, and was present at high levels in the cytoplasm. Analysis of cells expressing E-cadherin mutant constructs indicated that p120 is required for the E-cadherin-mediated transition from weak to strong adhesion. In aggregation assays, cells expressing p120-uncoupled E-cadherin formed only weak cell aggregates, which immediately dispersed into single cells upon pipetting. As an apparent consequence, the actin cytoskeleton failed to insert properly into peripheral E-cadherin plaques, resulting in the inability to form a continuous circumferential ring around cell colonies. Our data suggest that p120 directly or indirectly regulates the E-cadherin-mediated transition to tight cell-cell adhesion, possibly blocking subsequent events necessary for reorganization of the actin cytoskeleton and compaction.