Cadherins are transmembrane glycoproteins involved in Ca2+-dependent cell-cell adhesion. Deletion of the COOH-terminal residues of the E-cadherin cytoplasmic domain has been shown to abolish its cell adhesive activity, which has been ascribed to the failure of the deletion mutants to associate with catenins. Based on our present results, this concept needs revision. As was reported previously, leukemia cells (K562) expressing E-cadherin with COOH-terminal deletion of 37 or 71 amino acid residues showed almost no aggregation. Cells expressing E-cadherin with further deletion of 144 or 151 amino acid residues, which eliminates the membrane-proximal region of the cytoplasmic domain, showed E-cadherin-dependent aggregation. Thus, deletion of the membrane-proximal region results in activation of the nonfunctional E-cadherin polypeptides. However, these cells did not show compaction. Chemical cross-linking revealed that the activated E-cadherin polypeptides can be cross-linked to a dimer on the surface of cells, whereas the inactive polypeptides, as well as the wild-type E-cadherin polypeptide containing the membrane-proximal region, can not. Therefore, the membrane-proximal region participates in regulation of the adhesive activity by preventing lateral dimerization of the extracellular domain.