Wnt genes encode a large family of secreted, cysteine-rich proteins that play key roles as intercellular signaling molecules in development. Genetic studies in Drosophila and Caenorhabditis elegans, ectopic gene expression in Xenopus, and gene knockouts in the mouse have demonstrated the involvement of Wnts in processes as diverse as segmentation, CNS patterning, and control of asymmetric cell divisions. The transduction of Wnt signals between cells proceeds in a complex series of events including post-translational modification and secretion of Wnts, binding to transmembrane receptors, activation of cytoplasmic effectors, and, finally, transcriptional regulation of target genes. Over the past two years our understanding of Wnt signaling has been substantially improved by the identification of Frizzled proteins as cell surface receptors for Wnts and by the finding that beta-catenin, a component downstream of the receptor, can translocate to the nucleus and function as a transcriptional activator. Here we review recent data that have started to unravel the mechanisms of Wnt signaling.