Infection with Helicobacter pylori cagA-positive strains is associated with gastric adenocarcinoma. Intestinal metaplasia is a precancerous lesion of the stomach characterized by transdifferentiation of the gastric mucosa to an intestinal phenotype. The H. pylori cagA gene product, CagA, is delivered into gastric epithelial cells, where it undergoes tyrosine phosphorylation by Src family kinases. Tyrosine-phosphorylated CagA specifically binds to and activates SHP-2 phosphatase, thereby inducing cell-morphological transformation. We report here that CagA physically interacts with E-cadherin independently of CagA tyrosine phosphorylation. The CagA/E-cadherin interaction impairs the complex formation between E-cadherin and beta-catenin, causing cytoplasmic and nuclear accumulation of beta-catenin. CagA-deregulated beta-catenin then transactivates beta-catenin-dependent genes such as cdx1, which encodes intestinal specific CDX1 transcription factor. In addition to beta-catenin signal, CagA also transactivates p21(WAF1/Cip1), again, in a phosphorylation-independent manner. Consequently, CagA induces aberrant expression of an intestinal-differentiation marker, goblet-cell mucin MUC2, in gastric epithelial cells that have been arrested in G1 by p21(WAF1/Cip1). These results indicate that perturbation of the E-cadherin/beta-catenin complex by H. pylori CagA plays an important role in the development of intestinal metaplasia, a premalignant transdifferentiation of gastric epithelial cells from which intestinal-type gastric adenocarcinoma arises.