E-cadherin mediated cell-cell adhesion plays a critical role in epithelial cell polarization and morphogenesis. Our recent studies suggest that the desmosomal cadherin, desmoglein 3 (Dsg3) cross talks with E-cadherin and regulates its adhesive function in differentiating keratinocytes. However, the underlying mechanism remains not fully elucidated. Since E-cadherin trafficking has been recognized to be a central determinant in cell-cell adhesion and homeostasis we hypothesize that Dsg3 may play a role in regulating E-cadherin trafficking and hence the cell-cell adhesion. Here we investigated this hypothesis in cells with loss of Dsg3 function through RNAi mediated Dsg3 knockdown or the stable expression of the truncated mutant Dsg3DC. Our results showed that loss of Dsg3 resulted in compromised cell-cell adhesion and reduction of adherens junction and desmosome protein expression as well as the cortical F-actin formation. As a consequence, cells failed to polarize but instead displayed aberrant cell flattening. Furthermore, retardation of Ecadherin internalization and recycling was consistently observed in these cells during the process of calcium induced junction assembling. In contrast, enhanced cadherin endocytosis was detected in cells with overexpression of Dsg3 compared to control cells. Importantly, this altered cadherin trafficking was found to be coincided with the reduced expression and activity of Rab proteins, including Rab5, Rab7 and Rab11 which are known to be involved in E-cadherin trafficking. Taken together, our findings suggest that Dsg3 functions as a key in cell-cell adhesion through at least a mechanism of regulating E-cadherin membrane trafficking.