Beta-catenin plays essential roles in both cell-cell adhesion and Wnt signal transduction, but what precisely controls beta-catenin targeting to cadherin adhesive complexes, or T-cell factor (TCF)-transcriptional complexes is less well understood. We show that during Wnt signaling, a form of beta-catenin is generated that binds TCF but not the cadherin cytoplasmic domain. The Wnt-stimulated, TCF-selective form is monomeric and is regulated by the COOH terminus of beta-catenin, which selectively competes cadherin binding through an intramolecular fold-back mechanism. Phosphorylation of the cadherin reverses the TCF binding selectivity, suggesting another potential layer of regulation. In contrast, the main cadherin-binding form of beta-catenin is a beta-catenin-alpha-catenin dimer, indicating that there is a distinct molecular form of beta-catenin that can interact with both the cadherin and alpha-catenin. We propose that participation of beta-catenin in adhesion or Wnt signaling is dictated by the regulation of distinct molecular forms of beta-catenin with different binding properties, rather than simple competition between cadherins and TCFs for a single constitutive form. This model explains how cells can control whether beta-catenin is used independently in cell adhesion and nuclear signaling, or competitively so that the two processes are coordinated and interrelated.