Nuclear localization and formation of beta-catenin-lymphoid enhancer factor 1 complexes are not sufficient for activation of gene expression. In response to activation of the Wnt signaling pathway, beta-catenin accumulates in the nucleus, where it cooperates with LEF/TCF (for lymphoid enhancer factor and T-cell factor) transcription factors to activate gene expression. The mechanisms by which beta-catenin undergoes this shift in location and participates in activation of gene transcription are unknown. We demonstrate here that beta-catenin can be imported into the nucleus independently of LEF/TCF binding, and it may also be exported from nuclei. We have introduced a small deletion within beta-catenin (Delta19) that disrupts binding to LEF-1, E-cadherin, and APC but not axin. This Delta19 beta-catenin mutant localizes to the nucleus because it may not be efficiently sequestered in the cytoplasm. The nuclear localization of Delta19 definitively demonstrates that the mechanisms by which beta-catenin localizes in the nucleus are completely independent of LEF/TCF factors. beta-Catenin and LEF-1 complexes can activate reporter gene expression in a transformed T-lymphocyte cell line (Jurkat) but not in normal T lymphocytes, even though both factors are nuclear. Thus, localization of both factors to the nucleus is not sufficient for activation of gene expression. Excess beta-catenin can squelch reporter gene activation by LEF-1-beta-catenin complexes but not activation by the transcription factor VP16. Taken together, these data suggest that a third component is necessary for gene activation and that this third component may vary with cell type.