Objective Deregulation of the Wnt signalling pathway by mutations in the Apc or β-catenin genes underlies colorectal carcinogenesis. As a result, β-catenin stabilises, translocates to the nucleus, and activates gene transcription. Intestinal tumours show a heterogeneous pattern of nuclear β-catenin, with the highest levels observed at the invasion front. Activation of receptor tyrosine kinases in these tumour areas by growth factors expressed by surrounding stromal cells phosphorylate β-catenin at tyrosine residues, which is thought to increase β-catenin nuclear translocation and tumour invasiveness. This study investigates the relevance of β-catenin tyrosine phosphorylation for Wnt signalling and intestinal tumorigenesis in vivo. Design A conditional knock-in mouse model was generated into which the phospho-mimicking Y654E modification in the endogenous β-catenin gene was introduced. Results This study provided in vivo evidence that β-catenin(E654) is characterised by reduced affinity for cadherins, increased signalling and strongly increased phosphorylation at serine 675 by protein kinase A (PKA). In addition, homozygosity for the β-catenin(E654) targeted allele caused embryonic lethality, whereas heterozygosity predisposed to intestinal tumour development, and strongly enhanced Apc-driven intestinal tumour initiation associated with increased nuclear accumulation of βcatenin. Surprisingly, the expression of β-catenin(E654) did not affect histological grade or induce tumour invasiveness. Conclusions A thus far unknown mechanism was uncovered in which Y654 phosphorylation of β-catenin facilitates additional phosphorylation at serine 675 by PKA. In addition, in contrast to the current belief that β-catenin Y654 phosphorylation increases tumour progression to a more invasive phenotype, these results show that it rather increases tumour initiation by enhancing Wnt signalling.