A novel member of the human frizzled (Fz) gene family was cloned and found to be specifically expressed in 3 of 13 well differentiated (23%), 13 of 20 moderately differentiated (62%), and 12 of 14 poorly differentiated (86%) squamous cell esophageal carcinomas compared with the adjacent uninvolved normal mucosa. The FzE3 cDNA encodes a protein of 574 amino acids and shares high sequence homology with the human FzD2 gene particularly in the putative ligand binding region of the cysteine-rich extracellular domain. Functional analysis revealed that transfection and expression of the FzE3 cDNA in esophageal carcinoma cells stimulates complex formation between adenomatous polyposis coli (APC) and beta-catenin followed by nuclear translocation of beta-catenin. Furthermore, cotransfection of a mutant construct encoding a FzE3 protein with a C-terminal truncation completely inhibited the interaction of APC with beta-catenin in cells. Finally, coexpression of FzE3 with Lef-1 transcription factor enhanced beta-catenin translocation to the nucleus. These observations suggest that FzE3 gene expression may down-regulate APC function and enhance beta-catenin mediated signals in poorly differentiated human esophageal carcinomas.