The DF3/MUC1 mucin-like transmembrane oncoprotein is overexpressed by most human carcinomas. The MUC1 cytoplasmic domain (CD) binds directly to the Wnt effector, beta-catenin, and colocalizes with beta-catenin in the nucleus; however, the nuclear function of MUC1 is unknown. The present results demonstrate that MUC1 coactivates transcription of beta-catenin-Tcf-binding sites in the pTOPFLASH reporter. Activation of transcription was abrogated by expression of MUC1 with a Y-46->F mutation in the CD that attenuates binding of MUC1 and beta-catenin. We also show that transcription of the Wnt responsive cyclin D1 promoter is activated by MUC1, but not MUC1(Y46F), and that the cyclin D1 gene is upregulated in MUC1-positive cells. In concert with these results, MUC1-induced anchorage-independent growth and tumorigenicity were also abrogated by mutating MUC1 at the Y-46 site. These findings support a model in which the MUC1 functions as a transforming protein by coactivating transcription of Wnt target genes.