Genetic and epigenetic studies in different cancers, including cutaneous carcinomas, have implicated T-cadherin (T-cad) as a tumor suppressor. Immunohistochemical and in vitro studies have suggested that T-cad loss promotes incipient invasiveness in cutaneous squamous cell carcinoma (SCC). Molecular mechanisms are unknown. This study found that the main consequence of T-cad silencing in SCC is facilitation of ligand-dependent EGFR activation, whereas T-cad overexpression impedes EGFR activation. Gain- and loss-of-function studies in A431 SCC cells demonstrate T-cad-controlled responsiveness to EGF with respect to pharmacological inhibition of EGFR and to diverse signaling and functional events of the EGFR activation cascade (EGFR phosphorylation, internalization, nuclear translocation, cell retraction/de-adhesion, motility, invasion, integrin β1, and Rho small GTPases such as RhoA, Rac1, and Cdc42 activation). Further, T-cad modulates the EGFR pathway activity by influencing membrane compartmentalization of EGFR; T-cad upregulation promotes retention of EGFR in lipid rafts, whereas T-cad silencing releases EGFR from this compartment, rendering EGFR more accessible to ligand stimulation. This study reveals a mechanism for fine-tuning of EGFR activity in SCC, whereby T-cad represents an auxiliary "negative" regulator of the EGFR pathway, which impacts invasion-associated behavioral responses of SCC to EGF. This action of T-cad in SCC may serve as a paradigm explaining other malignancies displaying concomitant T-cad loss and enhanced EGFR activity.