Convincing evidence has accumulated to identify the Frizzled proteins as receptors for the Wnt growth factors. In parallel, a number of secreted frizzled-like proteins with a conserved N-terminal frizzled motif have been identified. One of these proteins, Frzb-1, binds Wnt-1 and Xwnt-8 proteins and antagonizes Xwnt-8 signaling in Xenopus embryos. Here we report that Frzb-1 blocks Wnt-1 induced cytosolic accumulation of beta-catenin, a key component of the Wnt signaling pathway, in human embryonic kidney cells. Structure/function analysis reveals that complete removal of the frizzled domain of Frzb-1 abolishes the Wnt-1/Frzb-1 protein interaction and the inhibition of Wnt-1 mediated axis duplication in Xenopus embryos. In contrast, removal of the C-terminal portion of the molecule preserves both Frzb-Wnt binding and functional inhibition of Wnt signaling. Partial deletions of the Frzb-1 cysteine-rich domain maintain Wnt-1 interaction, but functional inhibition is lost. Taken together, these findings support the conclusion that the frizzled domain is necessary and sufficient for both activities. Interestingly, Frzb-1 does not block Wnt-5A signaling in a Xenopus functional assay, even though Wnt-5A coimmunoprecipitates with Frzb-1, suggesting that coimmunoprecipitation does not necessarily imply inhibition of Wnt function.