We have previously identified a human receptor protein tyrosine phosphatase of the MAM domain family, termed PCP-2, in human pancreatic adenocarcinoma cells and found that this protein was colocalized with beta-catenin and E-cadherin at cell junctions [Wang, H.-Y., et al. (1996) Oncogene 12, 2555-2562]. Its intracellular part consists of two tandem phosphatase domains and a relatively large juxtamembrane region that is homologous to the conserved intracellular domain of cadherins, suggesting a role in the regulation of cell adhesion. This study reports that PCP-2 was endogenously expressed at the cell surface and upregulated with increased cell density. An in vivo binding assay revealed that PCP-2 could directly interact with beta-catenin through a region in the juxtamembrane domain. Tyrosine phosphorylation of beta-catenin by EGF or active SrcY527F did not disrupt the formation of the PCP-2-beta-catenin complex, while PCP-2 in this complex could cause a significant reduction in the phosphorylation level in beta-catenin. Finally, we showed that PCP-2 was a negative regulator for cell migration. In conclusion, interaction of PCP-2 with its substrate beta-catenin is involved in the process of cell-cell contact.