Polycystin-1 (PC1), the product of the PKD1 gene mutated in the majority of autosomal dominant polycystic kidney disease (ADPKD) cases, undergoes a cleavage resulting in the intracellular release of its C-terminal tail (CTT). Here, we demonstrate that the PC1 CTT co-localizes with and binds to beta-catenin in the nucleus. This interaction requires a nuclear localization motif present in the PC1 CTT as well as the N-terminal portion of beta-catenin. The PC1 CTT inhibits the ability of both beta-catenin and Wnt ligands to activate T-cell factor (TCF)-dependent gene transcription, a major effector of the canonical Wnt signaling pathway. The PC1 CTT may produce this effect by reducing the apparent affinity of the interaction between beta-catenin and the TCF protein. DNA microarray analysis reveals that the canonical Wnt signaling pathway is activated in ADPKD patient cysts. Our results suggest a novel mechanism through which PC1 cleavage may impact upon Wnt-dependent signaling and thereby modulate both developmental processes and cystogenesis.