Wnt signalling controls the transcription of genes that function during normal and malignant development. Stimulation by canonical Wnt ligands activates beta-catenin (or Drosophila melanogaster Armadillo) by blocking its phosphorylation, resulting in its stabilization and translocation to the nucleus. Here, Armadillo/beta-catenin binds to TCF/LEF transcription factors and recruits chromatin-modifying and -remodelling complexes to transcribe Wnt target genes. The transcriptional activity of Armadillo/beta-catenin depends on two conserved nuclear proteins recently discovered in Drosophila, Pygopus (Pygo) and Legless/BCL-9 (Lgs). Lgs functions as an adaptor between Pygo and Armadillo/beta-catenin, but how Armadillo/beta-catenin is controlled by Pygo and Lgs is not known. Here, we show that the nuclear localization of Lgs entirely depends on Pygo, which itself is constitutively localized to the nucleus; thus, Pygo functions as a nuclear anchor. Pygo is also required for high nuclear Armadillo levels during Wingless signalling, and together with Lgs increases the transcriptional activity of beta-catenin in APC mutant cancer cells. Notably, linking Armadillo to a nuclear localization sequence rescues pygo and lgs mutant fly embryos. This indicates that Pygo and Lgs function in targeting Armadillo/beta-catenin to the nucleus, thus ensuring its availability to TCF during Wnt signalling.