Wnt signaling is essential during development while deregulation of this pathway frequently leads to the formation of various tumors including colorectal carcinomas. A key component of the pathway is beta-catenin that, in association with TCF-4, directly regulates the expression of Wnt-responsive genes. To identify novel binding partners of beta-catenin that may control its transcriptional activity, we performed a mammalian two-hybrid screen and isolated the Tax-interacting protein (TIP-1). The in vivo complex formation between beta-catenin and TIP-1 was verified by coimmunoprecipitation, and a direct physical association was revealed by glutathione S-transferase pull-down experiments in vitro. By using a panel of deletion mutants of both proteins, we demonstrate that the interaction is mediated by the PDZ (PSD-95/DLG/ZO-1 homology) domain of TIP-1 and requires primarily the last four amino acids of beta-catenin. TIP-1 overexpression resulted in a dose-dependent decrease in the transcriptional activity of beta-catenin when tested on the TOP/FOPFLASH reporter system. Conversely, siRNA-mediated knock-down of endogenous TIP-1 slightly increased endogenous beta-catenin transactivation function. Moreover, we show that overexpression of TIP-1 reduced the proliferation and anchorage-independent growth of colorectal cancer cells. These data suggest that TIP-1 may represent a novel regulatory element in the Wnt/beta-catenin signaling pathway.