Past studies on β-catenin in cancer cells focused on nuclear localized β-catenin and its involvement in the Wnt pathway. Our goal here was to investigate the function of β-catenin in both the cytoplasm and nucleus on the regulation of MT1-MMP expression and activity. We found that β-catenin in MDCK non-cancer cells inhibited the cell surface localization of MT1-MMP, and thus its proteolytic activity on pro-MMP2 activation, via direct interaction with the 18-amino-acid cytoplasmic tail of MT1-MMP in the cytoplasm. In contrast, β-catenin in HT1080 cancer cells enhanced the activity of MT1-MMP by entering the nucleus and activating transcription factor Tcf-4/Lef, and elevating the level of MT1-MMP protein. We also found that enhancement of cell growth in three-dimensional (3-D)/two-dimensional (2-D) type I collagen gels and of cell migration by MT1-MMP were inhibited by β-catenin in MDCK cells, whereas these functions were enhanced in HT1080 cells. In addition, regulation of MT1-MMP by β-catenin involved E-cadherin in MDCK cells and Wnt-3a in HT1080 cells. Taken together, our results present a differential effect of cytoplasmic and nuclear β-catenin on MT1-MMP activity in non-cancer cells versus cancer cells. These differences were most probably due to different subcellular locations and different involved pathways of β-catenin in these cells.