Tight control of cell proliferation and morphogenesis is required to ensure normal tissue patterning and prevent cancer formation. Overexpression of the ErbB-2/Neu receptor tyrosine kinase is associated with increased progression in human breast cancer, yet in breast explant cultures, the ErbB-2/Neu receptor contributes to alveolar differentiation. To examine the consequence of deregulated ErbB-2/Neu activation on epithelial morphogenesis, we have expressed a constitutively activated mutant of ErbB-2/Neu in a Madin-Darby canine kidney (MDCK) epithelial cell model. Using two-dimensional cultures we demonstrate that activated ErbB-2/Neu induces breakdown of cell-cell junctions, increased cell motility and dispersal of epithelial colonies. This correlates with reorganization of the actin cytoskeleton and focal adhesions and loss of insoluble cell-cell junction complexes involving E-cadherin. Interestingly, a constitutively activated ErbB-2/Neu receptor promotes an invasive morphogenic program in MDCK cells in a three-dimensional matrix. We show that two tyrosines in the carboxy-terminal tail of ErbB-2/Neu, involved in the phosphorylation of the Shc adapter protein, are each sufficient to promote epithelial-mesenchymal like transition and enhanced cell motility in two-dimensional culture and cell invasion rather than a morphogenic response in matrix culture. This provides a model system to investigate ErbB-2/Neu induced signaling pathways required for epithelial cell dispersal and invasion versus morphogenesis.