Secreted frizzled related proteins (Sfrps) are extracellular attenuators of Wnt signaling that play important roles in both embryogenesis and oncogenesis. Although Sfrps are generally thought to bind and sequester Wnts away from active receptor complexes, very little is known about the specificity of Sfrp family members for various Wnts. In the developing chick neural tube, sfrp-1, 2, and 3 transcripts are expressed in and adjacent to the dorsal neural tube, where Wnt-1 and Wnt-3a are expressed. To better define the possible roles of Sfrp-1, 2, and 3 in the neural tube, we first tested the ability of purified Sfrps to inhibit Wnt-3a-induced accumulation of beta-catenin in L cells. We find that both Sfrp-1 and Sfrp-2 can inhibit Wnt-3a activity while Sfrp-3 cannot. To determine where Sfrp-1 and Sfrp-2 impinge on the Wnt signaling pathway, we tested the ability of these Sfrps to inhibit Wnt signaling induced by the addition of LiCl, an inhibitor of GSK-3. Sfrp-1 and Sfrp-2 are unable to inhibit the accumulation of beta-catenin in LiCl-treated cells, suggesting that the ability of Sfrps to inhibit the accumulation of beta-catenin is GSK-3 dependent. We have further shown that Sfrp-2 inhibits the ability of ectopic Wnt-3a to stimulate proliferation in the developing chick neural tube. These results provide the framework for understanding how Sfrps function to regulate Wnt-3a activity in developing embryos and in cancer.