Regulation of cadherin-mediated adhesion can occur rapidly at the cell surface. To understand the mechanism underlying cadherin regulation, it is essential to elucidate the homophilic binding mechanism that underlies all cadherin-mediated functions. Therefore, we have investigated the structural and functional properties of the extracellular segment of Xenopus C-cadherin using a purified, recombinant protein (CEC 1-5). CEC 1-5 supported adhesion of CHO cells expressing C-cadherin. The extracellular segment was also capable of mediating aggregation of microspheres. Chemical cross-linking and gel filtration revealed that CEC 1-5 formed dimers in the presence as well as absence of calcium. Analysis of the functional activity of purified dimers and monomers demonstrated that dimers retained substantially greater homophilic binding activity than monomers. These results demonstrate that lateral dimerization is necessary for homophilic binding between cadherin extracellular segments and suggest multiple potential mechanisms for the regulation of cadherin activity. Since the extracellular segment alone possessed significant homophilic binding activity, the adhesive activity of the extracellular segment in a cellular context was analyzed. The adhesion of CHO cells expressing a truncated version of C-cadherin lacking the cytoplasmic tail was compared to cells expressing the wild-type C-cadherin using a laminar flow assay on substrates coated with CEC 1-5. CHO cells expressing the truncated C-cadherin were able to attach to CEC 1-5 and to resist detachment by low shear forces, demonstrating that tailless C-cadherin can mediate basic, weak adhesion of CHO cells. However, cells expressing the truncated C-cadherin did not exhibit the complete adhesive activity of cells expressing wild-type C-cadherin. Cells expressing wild-type C-cadherin remained attached to CEC 1-5 at high shear forces, while cells expressing the tailless C-cadherin did not adhere well at high shear forces. These results suggest that there may be two states of cadherin-mediated adhesion. The first, relatively weak state can be mediated through interactions between the extracellular segments alone. The second strong adhesive state is critically dependent on the cytoplasmic tail.