Expression of a dominant-negative, catalytically inactive form of the nonreceptor protein-tyrosine phosphatase PTP1B in L-cells constitutively expressing N-cadherin results in loss of N-cadherin-mediated cell-cell adhesion. PTP1B interacts directly with the cytoplasmic domain of N-cadherin, and this association is regulated by phosphorylation of tyrosine residues in PTP1B. The following three tyrosine residues in PTP1B are potential substrates for tyrosine kinases: Tyr-66, Tyr-152, and Tyr-153. To determine the tyrosine residue(s) that are crucial for the cadherin-PTP1B interaction we used sitedirected mutagenesis to create catalytically inactive PTP1B constructs bearing additional single, double, or triple mutations in which tyrosine was substituted by phenylalanine. Mutation Y152F eliminates binding to N-cadherin in vitro, whereas mutations Y66F and Y153F do not. Overexpression of the catalytically inactive PTP1B with the Y152F mutation in L-cells constitutively expressing N-cadherin has no effect on N-cadherin-mediated adhesion, and immunoprecipitation reveals that the mutant Y152F PTP1B does not associate with Ncadherin in situ. Furthermore, among cells overexpressing the Y152F mutant endogenous PTP1B associates with N-cadherin and is tyrosine-phosphorylated.Members of the cadherin family of cell-cell adhesion molecules are key players in morphogenetic processes, and regulation of cadherin function, as opposed to transcription and translation, is thought to be responsible for many of the rapid changes that occur during development. Classic cadherins are characterized by a highly conserved intracellular domain that interacts with the actin-containing cytoskeleton, an interaction essential for function. This interaction is mediated by ␣-and -catenin (1-4); -catenin associates directly with a 20-amino acid domain near the carboxyl terminus of cadherin (5, 6) and with ␣-catenin, which, in turn, interacts with actin, either directly (7) or indirectly, through ␣-actinin (8). -catenin not only performs a bridging role between cadherin and actin, but free -catenin can be translocated to the nucleus where it regulates transcription of cadherin and other gene products (9, 10). Thus, the regulation of free -catenin is of critical importance, and, consequently, the interaction of -catenin with cadherin has multiple ramifications on cellular function (11,12).Regulation of the interaction of -catenin with N-cadherin is mediated by the phosphorylation of tyrosine residues on -catenin (13, 14). In embryonic chick neural retina cells, hyperphosphorylation of -catenin is correlated with loss of its association with N-cadherin and loss of cadherin function (13,14). Enhanced phosphorylation of -catenin has also been correlated with loss of E-cadherin function (15)(16)(17)(18)(19). These data suggest that tyrosine kinases and/or phosphatases must play a critical role in maintaining -catenin association with cadherin and/or its ability to mediate the cytoskeletal linkage. We have reported that the nonreceptor protein-t...