The identification of genes predisposing to familial cancer is an essential step towards understanding the molecular events underlying tumorigenesis and is critical for the clinical management of affected families. Despite a declining incidence, gastric cancer remains a major cause of cancer death worldwide, and about 10% of cases show familial clustering. The relative contributions of inherited susceptibility and environmental effects to familial gastric cancer are poorly understood because little is known of the genetic events that predispose to gastric cancer. Here we describe the identification of the gene responsible for early-onset, histologically poorly differentiated, high grade, diffuse gastric cancer in a large kindred from New Zealand (Aotearoa). Genetic linkage analysis demonstrated significant linkage to markers flanking the gene for the calcium-dependent cell-adhesion protein E-cadherin. Sequencing of the E-cadherin gene revealed a G --> T nucleotide substitution in the donor splice consensus sequence of exon 7, leading to a truncated gene product. Diminished E-cadherin expression is associated with aggressive, poorly differentiated carcinomas. Underexpression of E-cadherin is a prognostic marker of poor clinical outcome in many tumour types, and restored expression of E-cadherin in tumour models can suppress the invasiveness of epithelial tumour cells. The role of E-cadherin in gastric cancer susceptibility was confirmed by identifying inactivating mutations in other gastric cancer families. In one family, a frameshift mutation was identified in exon 15, and in a second family a premature stop codon interrupted exon 13. These results describe, to our knowledge for the first time, a molecular basis for familial gastric cancer, and confirm the important role of E-cadherin mutations in cancer.