The Drosophila gene product Wingless (Wg) is a secreted glycoprotein and a member of the Wnt gene family. Genetic analysis of Drosophila epidermal development has defined a putative paracrine Wg signalling pathway involving the zeste-white 3/shaggy (zw3/sgg) gene product. Although putative components of Wg- (and by inference Wnt-) mediated signalling pathways have been identified by genetic analysis, the biochemical significance of most factors remains unproven. Here we show that in mouse 10T1/2 fibroblasts the activity of glycogen synthase kinase-3 (GSK-3), the murine homologue of Zw3/Sgg, is inactivated by Wg. This occurs through a signalling pathway that is distinct from insulin-mediated regulation of GSK-3 in that Wg signalling to GSK-3 is insensitive to wortmannin. Additionally, Wg-induced inactivation of GSK-3 is sensitive to both the protein kinase C (PKC) inhibitor Ro31-8220 and prolonged pre-treatment of 10T1/2 fibroblasts with phorbol ester. These findings provide the first biochemical evidence in support of the genetically defined pathway from Wg to Zw3/Sgg, and suggest a previously uncharacterized role for a PKC upstream of GSK-3/Zw3 during Wnt/Wg signal transduction.