Here we show that presenilin-1 (PS1), a protein involved in Alzheimer's disease, binds directly to epithelial cadherin (E-cadherin). This binding is mediated by the large cytoplasmic loop of PS1 and requires the membrane-proximal cytoplasmic sequence 604-615 of mature E-cadherin. This sequence is also required for E-cadherin binding of protein p120, a known regulator of cadherin-mediated cell adhesion. Using wild-type and PS1 knockout cells, we found that increasing PS1 levels suppresses p120/E-cadherin binding, and increasing p120 levels suppresses PS1/E-cadherin binding. Thus PS1 and p120 bind to and mutually compete for cellular E-cadherin. Furthermore, PS1 stimulates E-cadherin binding to beta- and gamma-catenin, promotes cytoskeletal association of the cadherin/catenin complexes, and increases Ca(2+)-dependent cell-cell aggregation. Remarkably, PS1 familial Alzheimer disease mutant DeltaE9 increased neither the levels of cadherin/catenin complexes nor cell aggregation, suggesting that this familial Alzheimer disease mutation interferes with cadherin-based cell-cell adhesion. These data identify PS1 as an E-cadherin-binding protein and a regulator of E-cadherin function in vivo.