Epithelial cell-cell contacts are mediated by E-cadherin interactions, which are regulated by the balanced local activity of Rho GTPases. Despite the known function of Rho at adherens junctions (AJs), little is known about the spatial control of Rho activity at these sites. Here we provide evidence that in breast epithelial cells the Deleted in Liver Cancer 3 (DLC3) protein localizes to AJs and is essential for E-cadherin function. DLC3 is a still poorly characterized RhoA-specific GTPase-activating protein that is frequently downregulated in various types of cancer. We demonstrate that DLC3 depletion leads to mislocalization of E-cadherin and catenins, which was associated with impaired cell aggregation and increased migration. This is explained by aberrant local Rho signaling because ROCK inhibition restored cell-cell contacts in DLC3 knockdown cells. We thus identify DLC3 as a novel negative regulator of junctional Rho and propose that DLC3 loss contributes to carcinogenesis by compromising epithelial integrity.