BACKGROUND & AIMS: The intestine-specific homeobox transcription factor Cdx2 is an important determinant of intestinal identity in the embryonic endoderm and regulates the balance between proliferation and differentiation in the adult intestinal epithelium. Human colon tumors often lose Cdx2 expression, and heterozygous inactivation of Cdx2 in mice increases colon tumorigenesis. We sought to identify Cdx2 target genes to determine how it contributes to intestinal homeostasis. METHODS: We used expression profiling analysis to identify genes that are regulated by Cdx2 in colon cancer cells lines. Regulation and function of a potential target gene were further investigated using various cell assays. RESULTS: In colon cancer cell lines, Cdx2 directly regulated the transcription of the gene that encodes the protocadherin Mucdhl. Mucdhl localized to the apex of differentiated cells in the intestinal epithelium, and its expression was reduced in most human colon tumors. Overexpression of Mucdhl inhibited low-density proliferation of colon cancer cells and reduced tumor formation in nude mice. One isoform of Mucdhl interacted with beta-catenin and inhibited its transcriptional activity. CONCLUSIONS: The transcription factor Cdx2 activates expression of the protocadherin Mucdhl, which interacts with beta-catenin and regulates activities of intestinal cells. Loss of Cdx2 expression in colon cancer cells might reduce expression of Mucdhl and thereby lead to tumor formation.