Cell migration requires precise control, which is altered or lost when tumor cells become invasive and metastatic. Although the integrity of cell-cell contacts, such as adherens junctions, is essential for the maintenance of functional epithelia, they need to be rapidly disassembled during migration. The transmembrane cell adhesion protein E-cadherin and the cytoplasmic catenins are molecular elements of these structures. Here we demonstrate that epithelial cell migration is accompanied by tyrosine phosphorylation of beta-catenin and an increase of its free cytoplasmic pool. We show further that the protein-tyrosine phosphatase LAR (leukocyte common antigen related) colocalizes with the cadherin-catenin complex in epithelial cells and associates with beta-catenin and plakoglobin. Interestingly, ectopic expression of protein-tyrosine phosphatase (PTP) LAR inhibits epithelial cell migration by preventing phosphorylation and the increase in the free pool of beta-catenin; moreover, it inhibits tumor formation in nude mice. These data support a function for PTP LAR in the regulation of epithelial cell-cell contacts at adherens junctions as well as in the control of beta-catenin signaling functions. Thus PTP-LAR appears to play an important role in the maintenance of epithelial integrity, and a loss of its regulatory function may contribute to malignant progression and metastasis.