Tumor budding is a histological feature that reflects loss of adhesion of tumor cells and is associated with locoregional metastasis of colorectal carcinoma. Although nuclear localization of beta-catenin is associated with tumor budding, the molecular mechanism remains largely elusive. In this study, we hypothesize that the epithelial cell adhesion molecule (Ep-CAM) is involved in tumor budding. In order to address this question, we performed immunohistochemistry on Ep-CAM using three different antibodies (monoclonal antibodies Ber-ep4 and 311-1K1 and a polyclonal antibody) and a double staining on beta-catenin and Ep-CAM. In addition, Ep-CAM mRNA was monitored with mRNA in situ hybridization. Subsequently, we determined the effect of Ep-CAM staining patterns on tumor spread in rectal cancer. In contrast to the tumor mass, budding cells of colorectal carcinoma displayed lack of membranous but highly increased cytoplasmic Ep-CAM staining and nuclear translocation of beta-catenin. mRNA in situ hybridization suggested no differences in Ep-CAM expression between the invasive front and the tumor mass. Importantly, reduced Ep-CAM staining at the invasive margin of rectal tumor specimens (n=133) correlated significantly with tumor budding, tumor grade and an increased risk of local recurrence (P=0.001, P=0.04 and P=0.03, respectively). These data demonstrate abnormal processing of Ep-CAM at the invasive margin of colorectal carcinomas. Our observations indicate that loss of membranous Ep-CAM is associated with nuclear beta-catenin localization and suggest that this contributes to reduced cell-cell adhesions, increased migratory potential and tumor budding.