Protein phosphatase 2A (PP2A) plays central roles in development, cell growth and transformation. Inactivation of the gene encoding the PP2A catalytic subunit Calpha by gene targeting generates a lethal embryonic phenotype. No mesoderm is formed in Calpha(-/-) embryos. Here, we found that during normal early embryonic development Calpha was predominantly present at the plasma membrane whereas the highly homologous isoform Cbeta was localized to the cytoplasm and nuclei, suggesting the inability of Cbeta to compensate for vital functions of Calpha in Calpha(-/-) embryos. In addition, PP2A was found in a complex containing the PP2A substrates E-cadherin and beta-catenin. In Calpha(-/-) embryos, E-cadherin and beta-catenin were redistributed from the plasma membrane to the cytosol. Cytosolic concentrations of beta-catenin were low. Our results suggest that Calpha is required for stabilization of E-cadherin/beta-catenin complexes at the plasma membrane.