Links between signal transduction, transcription and adhesion in epithelial bud development.

The morphogenesis of organs as diverse as lungs, teeth and hair follicles is initiated by a downgrowth from a layer of epithelial stem cells. During follicular morphogenesis, stem cells form this bud structure by changing their polarity and cell-cell contacts. Here we show that this process is achieved through simultaneous receipt of two external signals: a Wnt protein to stabilize beta-catenin, and a bone morphogenetic protein (BMP) inhibitor to produce Lef1. Beta-catenin then binds to, and activates, Lef1 transcription complexes that appear to act uncharacteristically by downregulating the gene encoding E-cadherin, an important component of polarity and intercellular adhesion. When either signal is missing, functional Lef1 complexes are not made, and E-cadherin downregulation and follicle morphogenesis are impaired. In Drosophila, E-cadherin can influence the plane of cell division and cytoskeletal dynamics. Consistent with this notion, we show that forced elevation of E-cadherin levels block invagination and follicle production. Our findings reveal an intricate molecular programme that links two extracellular signalling pathways to the formation of a nuclear transcription factor that acts on target genes to remodel cellular junctions and permit follicle formation.