beta-Catenin and plakoglobin are homologous proteins having a dual role in cell adhesion and in transactivation together with LEF/TCF transcription factors. Overexpression of plakoglobin suppresses tumorigenicity, whereas increased beta-catenin levels are considered oncogenic. We compared the nuclear translocation and transactivation by beta-catenin and plakoglobin. Overexpression of each protein resulted in nuclear translocation and formation of structures that also contained LEF-1 and vinculin with beta-catenin, but not with plakoglobin. Transfection of LEF-1 translocated endogenous beta-catenin, but not plakoglobin into the nucleus. Chimeras of the Gal4 DNA-binding domain and the transactivation domains of either plakoglobin or beta-catenin were equally potent in transactivation, but induction of LEF-1-responsive transcription was higher with beta-catenin. Overexpression of wt plakoglobin or mutant beta-catenin lacking the transactivation domain induced nuclear accumulation of the endogenous beta-catenin and LEF-1-responsive transactivation. The nuclear localization and constitutive beta-catenin-dependent transactivation in SW480 cancer cells were inhibited by overexpressing cadherin or alpha-catenin. Moreover, transfecting the cytoplasmic tail of cadherin inhibited transactivation, by competition with LEF-1 in the nucleus for beta-catenin binding. The results indicate that (1) plakoglobin and beta-catenin differ in nuclear translocation and complexing with LEF-1 and vinculin, (2) LEF-1-dependent transactivation is mainly driven by beta-catenin, (3) cadherin and alpha-catenin can sequester beta-catenin, inhibit its transcriptional activity, and antagonize its oncogenic action.