p120^ctn binds to the cytoplasmic domain of cadherins but its role is poorly understood. Colo 205 cells grow as dispersed cells despite their normal expression of E-cadherin and catenins. However, in these cells we can induce typical E-cadherin–dependent aggregation by treatment with staurosporine or trypsin. These treatments concomitantly induce an electrophoretic mobility shift of p120^ctn to a faster position. To investigate whether p120^ctn plays a role in this cadherin reactivation process, we transfected Colo 205 cells with a series of p120^ctn deletion constructs. Notably, expression of NH₂-terminally deleted p120^ctn induced aggregation. Similar effects were observed when these constructs were introduced into HT-29 cells. When a mutant N-cadherin lacking the p120^ctn-binding site was introduced into Colo 205 cells, this molecule also induced cell aggregation, indicating that cadherins can function normally if they do not bind to p120^ctn. These findings suggest that in Colo 205 cells, a signaling mechanism exists to modify a biochemical state of p120^ctn and the modified p120^ctn blocks the cadherin system. The NH₂ terminus–deleted p120^ctn appears to compete with the endogenous p120^ctn to abolish the adhesion-blocking action.