The formation and maintenance of tight junctions is essential for the development of epithelial cell polarity. Recently, a number of conserved polarity-regulating proteins have been shown to localize to epithelial tight junctions, and to play a role in the regulation of tight junction formation. The Crumbs3/PALS1/PATJ protein complex localizes at epithelial tight junctions and interacts with the polarity-regulating protein complex of Par6/Par3/aPKC. Overexpression of Crumbs3 in MDCKII cells leads to a delay in tight junction formation in these cells, suggesting a role in the regulation of tight junction development. Here we report new evidence that Crumbs3 indeed plays an essential role in tight junction formation. Mammary MCF10A cells express little endogenous Crumbs3 and fail to form tight junctions when grown under standard tissue culture conditions. The staining pattern of ZO-1, a tight junction marker, is fragmented, and other tight junction markers show either fragmented junctional expression or diffuse cytoplasmic staining. Expression of exogenous Crumbs3 induces the formation of tight junction structures marked by smooth, continuous ZO-1 staining at apical cell-cell junctions. A number of other tight junction markers, including claudin-1 and occludin, are also recruited to these junctions. Analysis by transmission electron microscopy and measurements of the transepithelial electrical resistance confirm that these structures are functional tight junctions. Mutations in either the Crumbs3 PDZ binding motif or the putative FERM binding motif lead to defects in the ability of Crumbs3 to promote tight junction development. Our results suggest that Crumbs3 plays an important role in epithelial tight junction formation, and also provide the first known functional role for the mammalian Crumbs FERM binding domain.