ADAM10 (a disintegrin and metalloprotease) initiates regulated intramembrane proteolysis by shedding the ectodomain of a number of different substrates. Shedding is followed by subsequent intramembrane proteolysis leading to the liberation of intracellular domains capable of nuclear signaling. ADAM10 substrates have been found at cell-cell contacts and are apparently involved in cell-cell interaction and cell migration. Here we have investigated the cellular mechanism that guides ADAM10 to substrates at cell-cell contacts. We demonstrate that intracellular trafficking of ADAM10 critically requires a novel sorting signal within its cytoplasmic domain. Sequential deletion of the cytoplasmic domain and site-directed mutagenesis suggest that a potential Src homology 3-binding domain is essential for ADAM10 sorting. In a polarized epithelial cell line this motif not only targets ADAM10 to adherens junctions but is also strictly required for ADAM10 function in E-cadherin processing and cell migration.