The genes encoding tyrosine kinase receptors EphB2 and EphB3 are beta-catenin and Tcf4 target genes in colorectal cancer (CRC) and in normal intestinal cells. In the intestinal epithelium, EphB signaling controls the positioning of cell types along the crypt-villus axis. In CRC, EphB activity suppresses tumor progression beyond the earliest stages. Here we show that EphB receptors compartmentalize the expansion of CRC cells through a mechanism dependent on E-cadherin-mediated adhesion. We demonstrate that EphB-mediated compartmentalization restricts the spreading of EphB-expressing tumor cells into ephrin-B1-positive territories in vitro and in vivo. Our results indicate that CRC cells must silence EphB expression to avoid repulsive interactions imposed by normal ephrin-B1-expressing intestinal cells at the onset of tumorigenesis.