Sox2, an embryonic stem cell marker, has been recently implicated in the pathogenesis of breast cancer (BC). Using liquid chromatography-mass spectrometry and co-immunoprecipitation, we identified β-catenin as a Sox2 binding partner in MCF7 cells. The interaction between Sox2 and β-catenin was substantially different between the two cell subsets separated based on their differential responsiveness to a Sox2 reporter. Specifically, while β-catenin binds to Sox2 in the nuclear fraction of cells showing reporter-responsiveness (i.e. RR cells), this interaction was not detectable in those that were reporter-unresponsive (i.e. RU cells). In RR but not in RU cells, siRNA knockdown of β-catenin significantly upregulated the Sox2 transcriptional activity, enhanced its DNA binding and increased the expression of its target genes. Correlating with these findings, while inhibition of β-catenin significantly downregulated the mammosphere formation efficiency in RU cells, this treatment paradoxically increased that of RR cells. To conclude, we identified that β-catenin is an important binding partner of Sox2 and a regulator of its transcriptional activity in a small subset of BC cells. The interaction between Sox2 and β-catenin provides a novel mechanism underlying the functional dichotomy of BC cells, which carries potential therapeutic implications.