Injury of the tubular epithelium and TGF-beta1-induced conversion of epithelial cells to alpha-smooth muscle actin (SMA)-expressing myofibroblasts are key features of kidney fibrosis. Since injury damages intercellular junctions and promotes fibrosis, we hypothesized that cell contacts are critical regulators of TGF-beta 1-triggered epithelial-to-mesenchymal transition (EMT). Here we show that TGF-beta 1 was unable to induce EMT in intact confluent monolayers, but three different models of injury-induced loss of epithelial integrity (subconfluence, wounding, and contact disassembly by Ca(2+)-removal) restored its EMT-inducing effect. This manifested in loss of E-cadherin, increased fibronectin production and SMA expression. TGF-beta 1 or contact disassembly alone only modestly stimulated the SMA promoter in confluent layers, but together exhibited strong synergy. Since beta-catenin is a component of intact adherens junctions, but when liberated from destabilized contacts may act as a transcriptional co-activator, we investigated its role in TGF-beta 1-provoked EMT. Contact disassembly alone induced degradation of E-cadherin and beta-catenin, but TGF-beta1 selectively rescued beta-catenin and stimulated the beta-catenin-driven reporter TopFLASH. Moreover, chelation of free beta-catenin with the N-cadherin cytoplasmic tail suppressed the TGF-beta1 plus contact disassembly-induced SMA promoter activation and protein expression. These results suggest a beta-catenin-dependent two-hit mechanism in which both an initial epithelial injury and TGF-beta 1 are required for EMT.