Chondrocyte fate determination and maintenance requires Sox9, an intrinsic transcription factor, but is inhibited by Wnt/beta-catenin signaling activated by extrinsic Wnt ligands. Here we explored the underlying molecular mechanism by which Sox9 antagonizes the Wnt/beta-catenin signaling in chondrocyte differentiation. We found that Sox9 employed two distinct mechanisms to inhibit Wnt/beta-catenin signaling: the Sox9 N terminus is necessary and sufficient to promote beta-catenin degradation, whereas the C terminus is required to inhibit beta-catenin transcriptional activity without affecting its stability. Sox9 binds to beta-catenin and components of the beta-catenin "destruction complex," glycogen synthase kinase 3 and beta-transducin repeat containing protein, to promote their nuclear localization. Independent of its DNA binding ability, nuclear localization of Sox9 is both necessary and sufficient to enhance beta-catenin phosphorylation and its subsequent degradation. Thus, one mechanism whereby Sox9 regulates chondrogenesis is to promote efficient beta-catenin phosphorylation in the nucleus. This mechanism may be broadly employed by other intrinsic cell fate determining transcription factors to promptly turn off extrinsic inhibitory Wnt signaling mediated by beta-catenin.