E-cadherin controls a wide array of cellular behaviors including cell-cell adhesion, differentiation and tissue development. Here we show that presenilin-1 (PS1), a protein involved in Alzheimer's disease, controls a gamma-secretase-like cleavage of E-cadherin. This cleavage is stimulated by apoptosis or calcium influx and occurs between human E-cadherin residues Leu731 and Arg732 at the membrane-cytoplasm interface. The PS1/gamma-secretase system cleaves both the full-length E-cadherin and a transmembrane C-terminal fragment, derived from a metalloproteinase cleavage after the E-cadherin ectodomain residue Pro700. The PS1/gamma-secretase cleavage dissociates E-cadherins, beta-catenin and alpha-catenin from the cytoskeleton, thus promoting disassembly of the E-cadherin-catenin adhesion complex. Furthermore, this cleavage releases the cytoplasmic E-cadherin to the cytosol and increases the levels of soluble beta- and alpha-catenins. Thus, the PS1/gamma-secretase system stimulates disassembly of the E-cadherin- catenin complex and increases the cytosolic pool of beta-catenin, a key regulator of the Wnt signaling pathway.