beta-Catenin is a protein that plays a role in intercellular adhesion as well as in the regulation of gene expression. The latter role of beta-catenin is associated with its oncogenic properties due to the loss of expression or inactivation of the tumor suppressor adenomatous polyposis coli (APC) or mutations in beta-catenin itself. We now demonstrate that another tumor suppressor, PTEN, is also involved in the regulation of nuclear beta-catenin accumulation and T cell factor (TCF) transcriptional activation in an APC-independent manner. We show that nuclear beta-catenin expression is constitutively elevated in PTEN null cells and this elevated expression is reduced upon reexpression of PTEN. TCF promoter/luciferase reporter assays and gel mobility shift analysis demonstrate that PTEN also suppresses TCF transcriptional activity. Furthermore, the constitutively elevated expression of cyclin D1, a beta-catenin/TCF-regulated gene, is also suppressed upon reexpression of PTEN. Mechanistically, PTEN increases the phosphorylation of beta-catenin and enhances its rate of degradation. We define a pathway that involves mainly integrin-linked kinase and glycogen synthase kinase 3 in the PTEN-dependent regulation of beta-catenin stability, nuclear beta-catenin expression, and transcriptional activity. Our data indicate that beta-catenin/TCF-mediated gene transcription is regulated by PTEN, and this may represent a key mechanism by which PTEN suppresses tumor progression.