Phosphatase and tensin homologue deleted on chromosome 10 (PTEN) is a dual-function phosphatase with tumor suppressor function compromised in a wide spectrum of cancers. Because tissue polarity and architecture are crucial modulators of normal and malignant behavior, we postulated that PTEN may play a role in maintenance of tissue integrity. We used two nonmalignant human mammary epithelial cell lines that form polarized, growth-arrested structures (acini) when cultured in three-dimensional laminin-rich extracellular matrix gels (lrECM). As acini begin to form, PTEN accumulates both in the cytoplasm and at cell-cell contacts where it colocalizes with the E-cadherin/beta-catenin complex. Reduction of PTEN levels by shRNA in lrECM prevents formation of organized breast acini and disrupts growth arrest. Importantly, disruption of acinar polarity and cell-cell contact by E-cadherin function-blocking antibodies reduces endogenous PTEN protein levels and inhibits its accumulation at cell-cell contacts. Conversely, in Skbr-3 breast cancer cells lacking endogenous E-cadherin expression, exogenous introduction of E-cadherin gene causes induction of PTEN expression and its accumulation at sites of cell interactions. These studies provide evidence that E-cadherin regulates both the PTEN protein levels and its recruitment to cell-cell junctions in three-dimensional lrECM, indicating a dynamic reciprocity between architectural integrity and the levels and localization of PTEN. This interaction thus seems to be a critical integrator of proliferative and morphogenetic signaling in breast epithelial cells.