Alzheimer disease-linked Presenilin-1 (PS1) is a negative modulator of beta-catenin/Tcf-4 activity. However, the mechanism underlying this effect is not well understood. We show here that the effects of PS1 on the activity of this complex in epithelial cells are independent of its gamma-secretase activity and its interaction with beta-catenin. As presented in this report PS1 also binds plakoglobin with similar affinity as beta-catenin, although this interaction does not involve equivalent residues in the two catenins. Moreover, PS1 association with plakoglobin enhances the interaction of this molecule with Tcf-4 and prevents its binding to DNA. These effects were observed with the unprocessed form of PS1, which has higher affinity for plakoglobin and beta-catenin than processed PS1. These results provide a new explanation for the effects of PS1 on gene transcription mediated by beta-catenin in epithelial cells.