Wg/Wnt signaling regulates cell proliferation and differentiation in species as divergent as nematodes, flies, frogs, and humans. Many components of this highly conserved process have been characterized and work from a number of laboratories is beginning to elucidate the mechanism by which this class of secreted growth factor triggers cellular decisions. The Wg/Wnt ligand apparently binds to Frizzled family receptor molecules to initiate a signal transduction cascade involving the novel cytosolic protein Dishevelled and the serine/threonine kinase Zeste-white 3/GSK3. Antagonism of Zw3 activity leads to stabilization of Armadillo/beta-catenin, which provides a transactivation domain when complexed with the HMG box transcription factor dTCF/LEF-1 and thereby activates expression of Wg/Wnt-responsive genes. The Wg/Wnt ligands pass through the secretory pathway and associate with extracellular matrix components; recent work shows that sulfated glycosaminoglycans are essential for proper transduction of the signal. Mutant forms of Wg in Drosophila reveal separable aspects of Wg function and suggest that proper transport of the protein across cells is essential for cell fate specification. Complex interactions with the Notch and EGF/Ras signaling pathways also play a role in cell fate decisions during different phases of Drosophila development. These many facets of Wg/Wnt signaling have been elucidated through studies in a variety of species, each with powerful and unique experimental approaches. The remarkable conservation of this pathway suggests that Wg/Wnt signal transduction represents a fundamental mechanism for the generation of diverse cell fates in animal embryos.