The Wingless (Wg/Wnt) signaling pathway is essential for metazoan development, where it is central to tissue growth and cellular differentiation. Deregulated Wg pathway activation underlies severe developmental abnormalities, as well as carcinogenesis. Armadillo/β-Catenin plays a key role in the Wg transduction cascade; its cytoplasmic and nuclear levels directly determine the output activity of Wg signaling and are thus tightly controlled. In all current models, once Arm is targeted for degradation by the Arm/β-Catenin destruction complex, its fate is viewed as set. We identified a novel Wg/Wnt pathway component, Armless (Als), which is required for Wg target gene expression in a cell-autonomous manner. We found by genetic and biochemical analyses that Als functions downstream of the destruction complex, at the level of the SCF/Slimb/βTRCP E3 Ub ligase. In the absence of Als, Arm levels are severely reduced. We show by biochemical and in vivo studies that Als interacts directly with Ter94, an AAA ATPase known to associate with E3 ligases and to drive protein turnover. We suggest that Als antagonizes Ter94's positive effect on E3 ligase function and propose that Als promotes Wg signaling by rescuing Arm from proteolytic degradation, spotlighting an unexpected step where the Wg pathway signal is modulated.