Occludin is an integral membrane protein of the epithelial cell tight junction (TJ). Its potential role in coordinating structural and functional events of TJ formation has been suggested recently. Using a rat salivary gland epithelial cell line (Pa-4) as a model system, we have demonstrated that occludin not only is a critical component of functional TJs but also controls the phenotypic changes associated with epithelium oncogenesis. Transfection of an oncogenic Raf-1 into Pa-4 cells resulted in a complete loss of TJ function and the acquisition of a stratified phenotype that lacked cell–cell contact growth control. The expression of occludin and claudin-1 was downregulated, and the distribution patterns of ZO-1 and E-cadherin were altered. Introduction of the human occludin gene into Raf-1–activated Pa-4 cells resulted in reacquisition of a monolayer phenotype and the formation of functionally intact TJs. In addition, the presence of exogenous occludin protein led to a recovery in claudin-1 protein level, relocation of the zonula occludens 1 protein (ZO-1) to the TJ, and redistribution of E-cadherin to the lateral membrane. Furthermore, the expression of occludin inhibited anchorage-independent growth of Raf-1–activated Pa-4 cells in soft agarose. Thus, occludin may act as a pivotal signaling molecule in oncogenic Raf- 1–induced disruption of TJs, and regulates phenotypic changes associated with epithelial cell transformation.