δ-Catenin binds the juxtamembrane domain of E-cadherin and is known to be overexpressed in some human tumors. However, the functions of δ-catenin in epithelial cells and carcinomas remain elusive. We found that prostate cancer cells overexpressing δ-catenin show an increase in multi-layer growth in culture. In these cells, δ-catenin colocalizes with E-cadherin at the plasma membrane, and the E-cadherin processing is noticeably elevated. E-Cadherin processing induced by δ-catenin is serum-dependent and requires MMP- and PS-1/γ-secretase-mediated activities. A deletion mutant of δ-catenin that deprives the ability of δ-catenin to bind E-cadherin or to recruit PS-1 to E-cadherin totally abolishes the δ-catenin-induced E-cadherin processing and the multilayer growth of the cells. In addition, prostate cancer cells overexpressing δ-catenin display an elevated total β-catenin level and increase nuclear distribution, resulting in the activation of β-catenin/LEF-1-mediated transcription and their downstream target genes as well as androgen receptor-mediated transcription. Indeed, human prostate tumor xenograft in nude mice, which is derived from cells overexpressing δ-catenin, shows increased β-catenin nuclear localization and more rapid growth rates. Moreover, the metastatic xenograft tumor weights positively correlate with the level of 29 kD E-cadherin fragment, and primary human prostate tumor tissues also show elevated levels of δ-catenin expression and the E-cadherin processing. Taken together, these results suggest that δ-catenin plays an important role in prostate cancer progression through inducing E-cadherin processing and thereby activating β-catenin-mediated oncogenic signals.