Some truncating mutations of the APC tumor suppressor gene are associated with an attenuated phenotype of familial adenomatous polyposis coli (AAPC). This work demonstrates that APC alleles with 5' mutations produce APC protein that down-regulates beta-catenin, inhibits beta-catenin/T cell factor-mediated transactivation, and induces cell-cycle arrest. Transfection studies demonstrate that cap-independent translation is initiated internally at an AUG at codon 184 of APC. Furthermore, APC coding sequence between AAPC mutations and AUG 184 permits internal ribosome entry in a bicistronic vector. These data suggest that AAPC alleles in vivo may produce functional APC by internal initiation and establish a functional correlation between 5' APC mutations and their associated clinical phenotype.