Confluent endothelial cells respond poorly to the proliferative signals of VEGF. Comparing isogenic endothelial cells differing for vascular endothelial cadherin (VE-cadherin) expression only, we found that the presence of this protein attenuates VEGF-induced VEGF receptor (VEGFR) 2 phosphorylation in tyrosine, p44/p42 MAP kinase phosphorylation, and cell proliferation. VE-cadherin truncated in β-catenin but not p120 binding domain is unable to associate with VEGFR-2 and to induce its inactivation. β-Catenin–null endothelial cells are not contact inhibited by VE-cadherin and are still responsive to VEGF, indicating that this protein is required to restrain growth factor signaling. A dominant-negative mutant of high cell density–enhanced PTP 1 (DEP-1)//CD148 as well as reduction of its expression by RNA interference partially restore VEGFR-2 phosphorylation and MAP kinase activation. Overall the data indicate that VE-cadherin–β-catenin complex participates in contact inhibition of VEGF signaling. Upon stimulation with VEGF, VEGFR-2 associates with the complex and concentrates at cell–cell contacts, where it may be inactivated by junctional phosphatases such as DEP-1. In sparse cells or in VE-cadherin–null cells, this phenomenon cannot occur and the receptor is fully activated by the growth factor.