We report a highly conserved motif in the E-cadherin juxtamembrane domain that determines apical-lateral polarity by conferring both restricted mobility at the lateral membrane and transcytosis of apically mis-sorted protein to the lateral membrane. Mutations causing either increased lateral membrane mobility or loss of apical-lateral transcytosis result in partial mis-sorting of E-cadherin in Madin-Darby canine kidney cells. However, loss of both activities results in complete loss of polarity. We present evidence that residues required for restricted mobility mediate retention at the lateral membrane through interaction with ankyrin-G, whereas dileucine residues conferring apical-lateral transcytosis act through a clathrin-dependent process and function in an editing pathway. Ankyrin-G interaction with E-cadherin is abolished by the same mutations resulting in increased E-cadherin mobility. Clathrin heavy chain knockdown and dileucine mutation of E-cadherin both cause the same partial loss of polarity of E-cadherin. Moreover, clathrin knockdown causes no further change in polarity of E-cadherin with dileucine mutation but does completely randomize E-cadherin mutants lacking ankyrin-binding. Dileucine mutation, but not loss of ankyrin binding, prevented transcytosis of apically mis-sorted E-cadherin to the lateral membrane. Finally, neurofascin, which binds ankyrin but lacks dileucine residues, exhibited partial apical-lateral polarity that was abolished by mutation of its ankyrin-binding site but was not affected by clathrin knockdown. The polarity motif thus integrates complementary activities of lateral membrane retention through ankyrin-G and apical-lateral transcytosis of mis-localized protein through clathrin. Together, the combination of retention and editing function to ensure a high fidelity steady state localization of E-cadherin at the lateral membrane.