Loss of Apc appears to be one of the major events initiating colorectal cancer. However, the first events responsible for this initiation process are not well defined and the ways in which different epithelial cell types respond to Apc loss are unknown. We used a conditional gene-ablation approach in transgenic mice expressing tamoxifen-dependent Cre recombinase all along the crypt-villus axis to analyze the immediate effects of Apc loss in the small intestinal epithelium, both in the stem-cell compartment and in postmitotic epithelial cells. Within 4 days, Apc loss induced a dramatic enlargement of the crypt compartment associated with intense cell proliferation, apoptosis and impairment of cell migration. This result confirms the gatekeeper role of Apc in the intestinal epithelium in vivo. Although Apc deletion activatedβ-catenin signaling in the villi, we observed neither proliferation nor morphological change in this compartment. This highlights the dramatic difference in the responses of immature and differentiated epithelial cells to aberrant β-catenin signaling. These distinct biological responses were confirmed by molecular analyses, revealing that Myc and cyclin D1, two canonical β-catenin target genes, were induced in distinct compartments. We also showed that Apc is a crucial determinant of cell fate in the murine intestinal epithelium. Apc loss perturbs differentiation along the enterocyte,goblet and enteroendocrine lineages, and promotes commitment to the Paneth cell lineage through β-catenin/Tcf4-mediated transcriptional control of specific markers of Paneth cells, the cryptdin/defensin genes.