The leucocyte common antigen-related phosphatase (LAR) has been implicated in receptor tyrosine kinase signalling pathways while also displaying cell-density-dependency and localization to adherens junctions. Whereas physiological substrates for LAR have not been identified unequivocally, β-catenin associates with LAR and is a substrate in vitro. With the implication that LAR may play a role in regulating E-cadherin-dependent cell—cell communication and contact inhibition, the relationship of LAR with E-cadherin was investigated. LAR expression increased with cell density in the human breast cancer cell line MCF-7 and in Ln 3 cells derived from the 13762NF rat mammary adenocarcinoma. LAR protein levels decreased rapidly when cells were replated at a low density after attaining high expression of LAR at high cell density. COS-7 cells displayed comparable density-dependent regulation of LAR expression when transiently expressing exogenous LAR under the control of a constitutively active promoter, indicating that the regulation of expression is not at the level of gene regulation. Disrupting homophilic E-cadherin complexes by chelating extracellular calcium caused a marked decrease in LAR protein levels. Similarly, blocking E-cadherin interactions with saturating amounts of E-cadherin antibody (HECD-1) also led to a rapid and pronounced loss of cellular LAR. In contrast, mimicking cell-surface E-cadherin engagement by plating cells at low density on to dishes coated with HECD-1 resulted in a 2-fold increase in LAR expression compared with controls. These results suggest that density-dependent regulation of LAR expression is mediated by functional E-cadherin and may play a role in density-dependent contact inhibition by regulating tyrosine phosphorylation in E-cadherin complexes.