It is thought that the cadherin protein family of cell adhesion molecules regulates morphogenetic events in multicellular organisms. In this study we have investigated the importance of β-cell cadherins for cell-cell interactions mediating the organization of endocrine cells into pancreatic islets of Langerhans. To interfere with endogenous cadherin activity in β-cells during pancreatic development, we overexpressed a dominant negative mutant of mouse Ecadherin, lacking nearly all extracellular amino acids, in pancreatic β-cells in transgenic mice. Expression of the truncated E-cadherin receptor displaced both Eand Ncadherin from pancreatic β-cells. As a result, the initial clustering of β-cells, which normally begins at 13.5–14.5 days postcoitum, was perturbed. Consequently, the clustering of endocrine cells into islets, which normally begins at 17.5-18 days postcoitum, was abrogated. Instead, transgenic β-cells were found dispersed in the tissue as individual cells, while α-cells selectively aggregated into islet-like clusters devoid of β-cells. Furthermore, expression of truncated E-cadherin in β-cells resulted in an accumulation of β-catenin in the cytoplasm. Thus, we have for the first time shown in vivo that cadherins regulate adhesive properties of β-cells which are essential for the aggregation of endocrine cells into islets.