Breast epithelial cells cultured in three-dimensional (3D) collagen gels undergo ductal morphogenesis when the gel is compliant and they can achieve tensional homeostasis. We previously showed that this process requires down-regulation of Rho in compliant collagen gels, but the mechanism remains undefined. In this study, we find that p190RhoGAP-B, but not p190RhoGAP-A, mediates down-regulation of RhoA activity and ductal morphogenesis in T47D cells cultured in compliant 3D collagen gels. In addition, both RhoA and p190RhoGAP-B colocalize with p120-catenin at sites of cell-cell contact. The association between p190RhoGAP-B and p120-catenin is regulated by matrix compliance such that it increases in compliant vs. rigid collagen gels. Furthermore, knockdown of p120-catenin disrupts ductal morphogenesis, disregulates RhoA activity, and results in loss of p190B at cell-cell contacts. Consistent with these findings, using a RhoA-specific FRET biosensor (RhoA-FLARE.sc), we determined spatial RhoA activity to be significantly decreased at cell-cell contacts versus cell-ECM adhesions, and, of importance, spatial RhoA activity is regulated by p190B. This finding suggests that RhoA exists as an inactive pool at cell-cell contacts and is recruited to cell-ECM contacts within stiff matrices. Overall, these results demonstrate that RhoA is down-regulated at cell-cell contacts through p190RhoGAP-B, which is localized to cell-cell contacts by association with p120-catenin that is regulated by tensional homeostasis.