Epidermal growth factor (EGF) mediates many pleiotrophic biological effects, one of which is alteration of cellular morphology. In the present study, we examine the possibility that this alteration in cell morphology is caused in part by the dysfunction of cadherin-mediated cell-cell adhesion using the human oesophageal cancer cell line TE-2R, which expresses E-cadherin and EGF receptor. In the presence of EGF, TE-2R changed its shape from round to fibroblastic and its colony formation from compact to sparse. Vanadate, a tyrosine phosphatase inhibitor, further potentiated the EGF response, whereas herbimycin A, a tyrosine kinase inhibitor, interfered with it. Moreover, EGF enabled the cells to invade in organotypic raft culture. These phenomena were accompanied not by decreased expression of the E-cadherin molecule but by a change in its localisation from the lateral adhesion site to the whole cell surface. Both alpha- and beta-catenin, cadherin-binding proteins, were also expressed at the same level throughout these morphological changes. Finally, we examined tyrosine phosphorylation of E-cadherin and alpha- and beta-catenin, and observed tyrosine phosphorylation of beta-catenin induced by EGF. These results suggest that EGF counteracts E-cadherin-mediated junctional assembly through phosphorylation of beta-catenin and modulates tumour cell behaviour to a more aggressive phenotype.