The Wnt signaling pathway is activated in most human colorectal tumors. Mutational inactivation in the tumor suppressor adenomatous polyposis coli (APC), as well as activation of -catenin, causes the accumulation of -catenin, which in turn associates with the T cell factor/lymphoid enhancer factor (TCF/LEF) family of transcription factors and activates transcription of their target genes. Here we show that -catenin activates transcription of the BMP and activin membranebound inhibitor (BAMBI)/NMA gene. The expression level of BAMBI was found to be aberrantly elevated in most colorectal and hepatocellular carcinomas relative to the corresponding non-cancerous tissues. Expression of BAMBI in colorectal tumor cell lines was repressed by a dominant-negative mutant of TCF-4 or by an inhibitor of -catenin-TCF interaction, suggesting that -catenin is responsible for the aberrant expression of BAMBI in colorectal tumor cells. Furthermore, overexpression of BAMBI inhibited the response of tumor cells to transforming growth factor- signaling. These results suggest that -catenin interferes with transforming growth factor--mediated growth arrest by inducing the expression of BAMBI, and this may contribute to colorectal and hepatocellular tumorigenesis.The conversion of an intestinal epithelial cell into a fully transformed, metastatic cancer cell requires mutations in multiple proto-oncogenes and tumor suppressor genes (1, 2). Mutations in the tumor suppressor adenomatous polyposis coli (APC) 1 and -catenin occur during the early stages of this process. The product of the APC gene interacts with various proteins including -catenin, Axin, Rac-specific guanine nucleotide exchanger Asef, kinesin superfamily associated protein 3, EB1, microtubules, and the human homolog of the Drosophila Discs large (hDLG) (3)(4)(5)(6)(7)(8)(9)(10)(11). Through interacting with these molecules, APC functions in multiple signaling pathways, thereby regulating Wnt signaling, actin and microtubule cytoskeletal networks, and cell morphology and migration (8,(12)(13)(14)(15)(16)(17)(18).-catenin is an essential component of the Wnt signaling pathway and plays important roles in development and tumorigenesis (19 -22). Wnt signaling promotes the stabilization and accumulation of -catenin, which, in turn, interacts with the T cell factor/lymphoid enhancer factor (TCF/LEF) family of transcription factors and activates transcription of downstream genes such as c- Myc, cyclin D1,. APC interacts with -catenin, glycogen synthase kinase-3, casein kinase 1␣, and Axin or the closely related factor conductin/Axil (3-7, 28 -30). By recruiting -catenin into this multi-protein complex, APC promotes its proteasome-mediated degradation, hence mutations in APC or -catenin result in the accumulation of -catenin in colorectal tumor cells (31,32). Mutations in -catenin and Axin have also been identified in many other types of tumors, including hepatocellular carcinoma, ovarian cancer, and endometrial cancer (33-35). Thus, constitutive activation of -c...