Cadherins comprise a family of calcium-dependent glycoproteins that function in mediating cell-cell adhesion in virtually all solid tissues of multicellular organisms. In epithelial cells, E-cadherin represents a key molecule in the establishment and stabilization of cellular junctions. On the cellular level, E-cadherin is concentrated at the adherens junction and interacts homophilically with E-cadherin molecules of adjacent cells. Significant progress has been made in understanding the extra- and intracellular interactions of E-cadherin. Recent success in solving the three-dimensional structure of an extracellular cadherin domain provides a structural basis for understanding the homophilic interaction mechanism and the calcium requirement of cadherins. According to the crystal structure, individual cadherin molecules cooperate to form a linear cell adhesion zipper. The intracellular anchorage of cadherins is regulated by the dynamic association with cytoplasmic proteins, termed catenins. The cytoplasmic domain of E-cadherin is complexed with either beta-catenin or plakoglobin (gamma-catenin). Beta-catenin and plakoglobin bind directly to alpha-catenin, giving rise to two distinct cadherin-catenin complexes (CCC). Alpha-catenin is thought to link both CCC's to actin filaments. The anchorage of cadherins to the cytoskeleton appears to be regulated by tyrosine phosphorylation. Phosphorylation-induced junctional disassembly targets the catenins, indicating that catenins are components of signal transduction pathways. The unexpected association of catenins with the product of the tumor suppressor gene APC has led to the discovery of a second, cadherin-independent catenin complex. Two separate catenin complexes are therefore involved in the cross-talk between cell adhesion and signal transduction. In this review we focus on protein interactions regulating the molecular architecture and function of the CCC. In the light of a fundamental role of the CCC during mammalian development and tissue morphogenesis, we also discuss the phenotypes of embryos lacking E-cadherin or beta-catenin.