beta-Catenin controls both cadherin-mediated cell adhesion and activation of Wnt target genes. We demonstrate here that the beta-catenin-binding protein BCL9-2, a homolog of the human proto-oncogene product BCL9, induces epithelial-mesenchymal transitions of nontransformed cells and increases beta-catenin-dependent transcription. RNA interference of BCL9-2 in carcinoma cells induces an epithelial phenotype and translocates beta-catenin from the nucleus to the cell membrane. The switch between beta-catenin's adhesive and transcriptional functions is modulated by phosphorylation of Tyr 142 of beta-catenin, which favors BCL9-2 binding and precludes interaction with alpha-catenin. During zebrafish embryogenesis, BCL9-2 acts in the Wnt8-signaling pathway and regulates mesoderm patterning.