Intestinal epithelial differentiation entails the formation of highly specialized cells with specific absorptive, secretory, digestive and immune functions. Cell–cell and cell–microenvironment interactions appear to be crucial in determining the outcome of the differentiation process. Using the Caco‐2 cell line, which undergoes spontaneous re‐differentiation when grown past confluency, we observed a loss of VCAM‐1 (vascular cell adhesion molecule 1) mRNA expression, while ICAM‐1 (intercellular cell adhesion molecule 1) mRNA expression was seen to increase over the course of differentiation. Protein kinase Cθ (PKCθ) acted downstream of protein kinase Cα (PKCα) to inactivate inhibitor of κB (IκB) and activate nuclear factor κB (NF‐κB) in undifferentiated cells, and this pathway was inhibited in the differentiated cells. The increase in ICAM‐1 mRNA expression in the differentiated cells was due to increased promoter recruitment of C/EBPβ, which transcriptionally up‐regulated ICAM‐1 mRNA. However, protein expression of ICAM‐1 was found to decrease over the course of differentiation due to degradation in the proteasome and lysosome. Immunohistochemistry using tumor samples from colon cancer patients indicated that non‐transformed matched normal cells (well‐differentiatied) showed no ICAM‐1 expression, but the poorly differentiated tumor cells showed higher expression. Functionally, a decrease in adhesion to human umbilical vein endothelial cells was observed in the differentiated Caco‐2 cells. Thus, regulation of ICAM‐1 and VCAM‐1, although both NF‐κB target genes, appears to be different over the course of epithelial differentiation in Caco‐2 cells.