Much remains to be learned about how cell-cell and cell-matrix interactions are coordinated to influence the earliest development of neoplasia. We used novel 3D human tissue reconstructs that mimic premalignant disease in normal epidermis, to directly investigate how loss of E-cadherin function directs conversion to malignant disease. We used a genetically tagged variant of Ha-Ras-transformed human keratinocytes (II-4) expressing dominant-interfering E-cadherin fusion protein (H-2k(d)-Ecad). These cells were admixed with normal human keratinocytes and tumor cell fate was monitored in 3D reconstructed epidermis upon transplantation to immunodeficient mice. Tumor initiation was suppressed in tissues harboring control- and mock-infected II-4 cells that lost contact with the stromal interface. By contrast, H-2k(d)-Ecad-expressing cells persisted at this interface, thus enabling incipient tumor cell invasion upon in vivo transplantation. Loss of intercellular adhesion was linked to elevated cell surface expression of alpha2, alpha3 and beta1 integrins and increased adhesion to laminin-1 and Types I and IV collagen that was blocked with beta1-integrin antibodies, suggesting that invasion was linked to initial II-4 cell attachment at the stromal interface. Collectively, these results outline a novel aspect to loss of E-cadherin function that is linked to the mutually interdependent regulation of cell-cell and cell-matrix adhesion and has significant consequences for the conversion of premalignancy to cancer.