E-cadherin and p120 catenin (p120) are essential for epithelial homeostasis, but can also exert pro-tumorigenic activities. Here, we resolve this apparent paradox by identifying two spatially and functionally distinct junctional complexes in non-transformed polarized epithelial cells: one growth suppressing at the apical zonula adherens (ZA), defined by the p120 partner PLEKHA7 and a non-nuclear subset of the core microprocessor components DROSHA and DGCR8, and one growth promoting at basolateral areas of cell–cell contact containing tyrosine-phosphorylated p120 and active Src. Recruitment of DROSHA and DGCR8 to the ZA is PLEKHA7 dependent. The PLEKHA7–microprocessor complex co-precipitates with primary microRNAs (pri-miRNAs) and possesses pri-miRNA processing activity. PLEKHA7 regulates the levels of select miRNAs, in particular processing of miR-30b, to suppress expression of cell transforming markers promoted by the basolateral complex, including SNAI1, MYC and CCND1. Our work identifies a mechanism through which adhesion complexes regulate cellular behaviour and reveals their surprising association with the microprocessor.