beta-Catenin, a cytoplasmic protein known for its association with cadherin cell adhesion molecules, is also part of a signaling cascade involved in embryonic patterning processes such as the determination of the dorsoventral axis in Xenopus and determination of segment polarity in Drosophila. Previous studies suggest that increased cytoplasmic levels of beta-catenin correlate with signaling, raising questions about the need for in- teraction with cadherins in this process. We have tested the role of the beta-catenin-cadherin interaction in axis formation. Using beta-catenin deletion mutants, we demonstrate that significant binding to cadherins can be eliminated without affecting the signaling activity. Also, depletion of the soluble, cytosolic pool of beta-catenin by binding to overexpressed C-cadherin completely inhibited beta-catenin-inducing activity. We conclude that binding to cadherins is not required for beta-catenin signaling, and therefore the signaling function of beta-catenin is independent of its role in cell adhesion. Moreover, because beta-catenin signaling is antagonized by binding to cadherins, we suggest that cadherins can act as regulators of the intracellular beta-catenin signaling pathway.