The receptor-like protein tyrosine phosphatase DEP1, also known as CD148, is expressed predominantly in epithelial cells, in a variety of tumor cell lines, and in lymphocytes. Expression of DEP1 is enhanced at high cell density, and this observation suggests that DEP1 may function in the regulation of cell adhesion and possibly contact inhibition of cell growth. In order to investigate the function of DEP1, substrate-trapping mutants of the phosphatase were used to identify potential substrates. GST-fusion proteins containing the DEP1 catalytic domain with a substrate-trapping D/A mutation were found to interact with p120(ctn), a component of adherens junctions. DEP1 also interacted with other members of the catenin gene family including beta-catenin and gamma-catenin. The interaction with p120(ctn) is likely to be direct, as the interaction occurs in K562 cells lacking functional adherens junctions and E-cadherin expression. Catalytic domains of the tyrosine phosphatases PTP-PEST, CD45, and PTPbeta did not interact with proteins of the catenin family to detectable levels, suggesting that the interaction of DEP1 with these proteins is specific. DEP1 expression was concentrated at sites of cell-cell contact in A549 cells. p120(ctn) was found to colocalize with these structures. Together these data suggest an important role for DEP-1 in the function of cell-cell contacts and adherens junctions.