P120 catenin (p120ctn) belongs to the Armadillo family of proteins, which is implicated in cell-cell adhesion and signal transduction. Owing to alternative splicing and multiple translation initiation codons, several p120ctn isoforms can be expressed from a single gene. All p120ctn isoforms share the central Armadillo repeat domain but have divergent N- and C-termini. Little is known about the biological functions of the different isoforms. In this study, we examined the distribution of various p120ctn isoforms and the consequences of their expression in cultured cells of epidermal origin. Immunohistochemical analysis and western blotting revealed that melanocytes and melanoma cells primarily express the long isoform 1A, whereas keratinocytes express shorter isoforms, especially 3A, which localize to cell-cell adhesion junctions in a calcium-dependent manner. The shortest isoform 4A, which was detected in normal keratinocytes and melanocytes, was generally lost from cells derived from squamous cell carcinomas or melanomas. The C-terminal alternatively spliced exon B was present in the p120ctn transcripts in the colon, intestine and prostate, but was lost in several tumor tissues derived from these organs. To test whether p120ctn isoforms serve in distinct biological functions, we transiently transfected the expression constructs into melanoma cells (1205-Lu) and immortalized keratinocytes (HaCaT). Indeed, distinct domains of p120ctn are responsible for its different biological functions. The prominent branching phenotype was induced equally by isoforms 1A, 2A and 3A, whereas the shortest isoform 4A, which was devoid of the N-terminal domain, completely lacked this ability. Also, the exon-B-encoded sequences, as in the isoform 1AB, were sufficient to abolish the branching phenotype as induced by the isoform 1A. The induction of the branching phenotype cosegregated with the nuclear localization of the p120ctn isoforms 1A, 2A and 3A, whereas the isoforms 4A and 1AB, which were excluded from the nucleus, did not induce the branching phenotype. The N-terminal sequences that contain seven out of eight tyrosine residues, recently characterized as potential candidates for phosphorylation by Src kinase, are required for the nuclear localization and for the formation of the branching phenotype. Finally, expression of the p120ctn isoforms, which caused the branching phenotype, was associated with cellular relocalization of E-cadherin in HaCaT cells. Collectively, we have identified sequences within the p120ctn N-terminus that are prerequisites for both nuclear localization and the p120ctn-induced branching phenotype. Loss of the cytoplasmic pool of p120ctn from tumor cells suggests an important function for such isoforms in normal cells and tissues.