Beta-catenin plays a dual role as a major constituent of cadherin-based adherens junctions and also as a transcriptional coactivator. In normal ephitelial cells, at adherens junction level, beta-catenin links cadherins to the actin cytoskeleton. The structure of adherens junctions is dynamically regulated by tyrosine phosphorylation. In particular, cell-cell adhesion can be negatively regulated through the tyrosine phosphorylation of beta-catenin. Furthermore, the loss of beta-catenin-cadherin association has been correlated with the transition from a benign tumor to an invasive, metastatic cancer. Low-molecular-weight protein tyrosine phosphatase (LMW-PTP) is a ubiquitous PTP implicated in the regulation of mitosis and cytoskeleton rearrangement. Here we demonstrate that the amount of free cytoplasmic beta-catenin is decreased in NIH3T3, which overexpresses active LMW-PTP, and this results in a stronger association between cadherin complexes and the actin-based cytoskeleton with respect to control cells. Confocal microscopy analysis shows that beta-catenin colocalizes with LMW-PTP at the plasma membrane. Furthermore, we provide evidence that beta-catenin is able to associate with LMW-PTP both in vitro and in vivo. Moreover, overexpression of active LMW-PTP strongly potentiates cadherin-mediated cell-cell adhesion, whereas a dominant-negative form of LMW-PTP induces the opposite phenotype, both in NIH3T3 and in MCF-7 carcinoma cells. On the basis of these results, we propose that the stability of cell-cell contacts at the adherens junction level is positively influenced by LMW-PTP expression, mainly because of the beta-catenin and LMW-PTP interaction at the plasma membrane level with consequent dephosphorylation.