Beta-catenin plays multiple roles in cell-cell adhesion and Wnt signal transduction. Through the Wnt signal, the cellular level of beta-catenin is constitutively regulated by the multicomponent destruction complex containing glycogen synthase kinase 3beta, axin, and adenomatous polyposis coli. Here, we present multiple lines of evidence to demonstrate that LZTS2 (lucine zipper tumor suppressor 2) interacts with beta-catenin, represses the transactivation of beta-catenin, and affects the subcellular localization of beta-catenin. The LZTS2 gene is located at 10q24.3, which is frequently lost in a variety of human tumors. A functional nuclear export signal (NES) was identified in the C terminus of the protein (amino acids 631 to 641). Appending this motif to green fluorescent protein (GFP) induced nuclear exclusion of the GFP fusion protein. However, introducing point mutations in either one or two leucine residues of this NES sequence abolished the nuclear exclusion of the LZTS2 protein. The nuclear export of LZTS2 can be blocked by leptomycin B (LMB), an inhibitor of the CRM1/exportin-alpha pathway. Intriguingly, beta-catenin colocalizes with LZTS2 in the cytoplasm of cells in the absence of LMB but in the nuclei of cells in the presence of LMB. Increasing the LZTS2 protein in cells reduces the level of nuclear beta-catenin in SW480 cells. Taken together, these data demonstrate that LZTS2 is a beta-catenin-interacting protein that can modulate beta-catenin signaling and localization.