BACKGROUND: Epithelial cell adhesion molecule EpCAM is a transmembrane glycoprotein, which is frequently over-expressed in simple epithelia, progenitors, embryonic and tissue stem cells, carcinoma and cancer-initiating cells. Besides functioning as a homophilic adhesion protein, EpCAM is an oncogenic receptor that requires regulated intramembrane proteolysis for activation of its signal transduction capacity. Upon cleavage, the extracellular domain EpEX is released as a soluble ligand while the intracellular domain EpICD translocates into the cytoplasm and eventually into the nucleus in combination with four-and-a-half LIM domains protein 2 (FHL2) and beta-catenin, and drives cell proliferation. METHODS: EpCAM cleavage, induction of the target genes, and transmission of proliferation signals were investigated under varying density conditions using confocal laser scanning microscopy, immunoblotting, cell counting, and conditional cell systems. RESULTS: EpCAM cleavage, induction of the target genes, and transmission of proliferation signals were dependent on adequate cell-to-cell contact. If cell-to-cell contact was prohibited EpCAM did not provide growth advantages. If cells were allowed to undergo contact to each other, EpCAM transmitted proliferation signals based on signal transduction-related cleavage processes. Accordingly, the pre-cleaved version EpICD was not dependent on cell-to-cell contact in order to induce c-myc and cell proliferation, but necessitated nuclear translocation. For the case of contact-inhibited cells, although cleavage of EpCAM occurred, nuclear translocation of EpICD was reduced, as were EpCAM effects. CONCLUSION: Activation of EpCAM's cleavage and oncogenic capacity is dependent on cellular interaction (juxtacrine) to provide for initial signals of regulated intramembrane proteolysis, which then support signalling via soluble EpEX (paracrine).