Loss of alpha-catenin is one of the characteristics of prostate cancer. The catenins (alpha and beta) associated with E-cadherin play a critical role in the regulation of cell-cell adhesion. Tyrosine phosphorylation of beta-catenin dissociates it from E-cadherin and facilitates its entry into the nucleus, where beta-catenin acts as a transcriptional activator inducing genes involved in cell proliferation. Thus, beta-catenin regulates cell-cell adhesion and cell proliferation. Mechanisms controlling the balance between these functions of beta-catenin invariably are altered in cancer. Although a wealth of information is available about beta-catenin deregulation during oncogenesis, much less is known about how or whether alpha-catenin regulates beta-catenin functions. In this study, we show that alpha-catenin acts as a switch regulating the cell-cell adhesion and proliferation functions of beta-catenin. In alpha-catenin-null prostate cancer cells, reexpression of alpha-catenin increased cell-cell adhesion and decreased beta-catenin transcriptional activity, cyclin D1 levels, and cell proliferation. Further, Src-mediated tyrosine phosphorylation of beta-catenin is a major mechanism for decreased beta-catenin interaction with E-cadherin in alpha-catenin-null cells. alpha-Catenin attenuated the effect of Src phosphorylation by increasing beta-catenin association with E-cadherin. We also show that alpha-catenin increases the sensitivity of prostate cancer cells to a Src inhibitor in suppressing cell proliferation. This study reveals for the first time that alpha-catenin is a key regulator of beta-catenin transcriptional activity and that the status of alpha-catenin expression in tumor tissues might have prognostic value for Src targeted therapy.