The importance of loss of the cell-cell adhesion molecule E-cadherin (encoded by CDH1) to tumor progression is well established. However, CDH1 germ-line mutations predispose to the cancer susceptibility syndrome hereditary diffuse gastric cancer (HDGC), suggesting a role for E-cadherin in tumor initiation. The earliest indications of cancer in the stomachs of CDH1 mutation carriers are microscopic foci of intramucosal signet-ring cell carcinoma (SRCC; designated "eHDGC"). Here, we used N-methyl-N-nitrosourea (MNU) to promote gastric carcinogenesis in wild-type (wt) and cdh1(+/-) mice. MNU induced a variety of gastric tumors; however, intramucosal SRCC developed with an 11 times higher incidence in cdh1(+/-) mice compared with wt mice. The murine SRCC resembled the human eHDGCs in that they were hypoproliferative, lacked nuclear beta-catenin accumulation, and had reduced membrane localization of E-cadherin and its interacting junctional proteins. The down-regulation of E-cadherin in the murine SRCCs confirmed the importance of the second CDH1 hit to the initiation of diffuse gastric cancer. CDH1 promoter hypermethylation has been proposed to be a major second hit in advanced HDGC; however, its contribution to eHDGC was unknown. We thus examined a series of human eHDGC and detected CDH1 promoter methylation in 50% of foci. Promoter methylation was accompanied by reduced wt CDH1 mRNA levels in the foci and had a monoclonal pattern, consistent with an epigenetic initiation of disease. Together, these findings provide compelling evidence for a deficiency in cell-to-cell adhesion being sufficient to initiate diffuse gastric cancer in the absence of hyperproliferation and beta-catenin activation.