Epithelial cell-cell junctions, organized by adhesion proteins and the underlying actin cytoskeleton, are considered to be stable structures maintaining the structural integrity of tissues. Contrary to the idea that alpha-catenin links the adhesion protein E-cadherin through beta-catenin to the actin cytoskeleton, in the accompanying paper we report that alpha-catenin does not bind simultaneously to both E-cadherin-beta-catenin and actin filaments. Here we demonstrate that alpha-catenin exists as a monomer or a homodimer with different binding properties. Monomeric alpha-catenin binds more strongly to E-cadherin-beta-catenin, whereas the dimer preferentially binds actin filaments. Different molecular conformations are associated with these different binding states, indicating that alpha-catenin is an allosteric protein. Significantly, alpha-catenin directly regulates actin-filament organization by suppressing Arp2/3-mediated actin polymerization, likely by competing with the Arp2/3 complex for binding to actin filaments. These results indicate a new role for alpha-catenin in local regulation of actin assembly and organization at sites of cadherin-mediated cell-cell adhesion.