In most human colorectal cancers, mutations in the adenomatous polyposis coli gene (APC) or CTNNB1 constitutively activate the beta-catenin/T-cell factor (TCF)/lymphoid enhancer factor (LEF) signaling pathway. Here, we show that the transcription factor activator protein (AP)-2alpha inhibited a beta-catenin/TCF-responsive reporter in human embryonic kidney 293 cells and in two human colorectal cancer lines, despite the fact that beta-catenin and TCF-4 protein levels were unchanged in the nucleus. Co-immunoprecipitation studies revealed that AP-2alpha formed a complex with APC and beta-catenin and that AP-2alpha disrupted beta-catenin/TCF-4 interactions in the nucleus. Thus, AP-2alpha.APC.beta-catenin complex formation appears to suppress beta-catenin transactivation by shifting the pool of nuclear beta-catenin toward an inactive form, having reduced binding to TCF/LEF transcription factors. Glutathione S-transferase pull-down assays showed that AP-2alpha physically associated with APC rather than with beta-catenin, and the AP-2alpha binding site was identified in the N terminus of APC, involving both the heptad and armadillo repeat domains, whereas the APC binding site in AP-2alpha was in the basic region of the C-terminal DNA binding domain. These findings provide the first evidence for a specific interaction between the tumor suppressor protein APC and the transcription factor AP-2alpha, and they suggest a link between the Wnt signaling pathway and various other pathways of development and differentiation associated with AP-2alpha.