The Wnt genes encode secreted glycoproteins used in intercellular communication at multiple steps during development. Signalling by Wingless, the Drosophila Wnt-1 homologue, requires the activity of Armadillo, the homologue of vertebrate beta-catenin, which is a component of the cadherin/catenin complex at adherens junctions. The genetic link between wingless and armadillo suggests that cell fate specification and cell-cell adhesion might be controlled concurrently. For instance, in one extreme view, Wingless could specify cell fate entirely by modulating cell adhesion. Alternatively, it might signal independently of adherens junctions. To distinguish between these alternatives, we have expressed two polypeptides that have opposite effects on cadherin-dependent adhesion: full-length Drosophila E-cadherin and a dominant-negative truncated form. We found that overexpression of either construct mimics wingless phenotypes, thereby uncoupling changes in adhesion from signalling effects. We demonstrate that both constructs titrate Armadillo from a 'signalling' pool which is functionally distinct from the junctional pool.