Transforming growth factor beta (TGFβ) has profound growth-suppressive effects on normal epithelial cells, but supports metastasis formation in many tumour types. In most epithelial tumour cells TGFβ1 treatment results in epithelial dedifferentiation with reduced cell aggregation and enhanced cellular migration. Here we show that the epithelial dedifferentiation, accompanied by dissociation of the E-cadherin adhesion complex, induced by TGFβ1 depended on phosphatidylinositol 3-kinase (PI3-kinase) and the phosphatase PTEN as analysed in PANC-1 and Smad4-deficient BxPC-3 pancreatic carcinoma cells. TGFβ1 treatment enhanced tyrosine phosphorylation of α- and β-catenin, which resulted in dissociation of the E-cadherin/catenin complex from the actin cytoskeleton and reduced cell-cell adhesion. The PI3-kinase and PTEN were found associated with the E-cadherin/catenin complex via β-catenin. TGFβ1 treatment reduced the amount of PTEN bound to β-catenin and markedly increased the tyrosine phosphorylation of β-catenin. By contrast, forced expression of PTEN clearly reduced the TGFβ1-induced phosphorylation of β-catenin. The TGFβ1-induced β-catenin phosphorylation was also dependent on PI3-kinase and Ras activity. The described effects of TGFβ1 were independent of Smad4, which is homozygous deleted in BxPC-3 cells. Collectively, these data show that the TGFβ1-induced destabilisation of E-cadherin-mediated cell-cell adhesion involves phosphorylation of β-catenin, which is regulated by E-cadherin adhesion complex-associated PI3-kinase and PTEN.