The Wnt proteins constitute a large family of secreted signaling factors that performed a wide variety of inductive and regulatory functions in embryonic and postnatal development. In mammals, these include crucial roles in morphogenesis of the central nervous system, kidneys, limbs, and mammary glands. In recent years, much progress has been made in identifying components of the intracellular Wnt-1 signal transduction pathway through studies in Drosophila, C. elegans, Xenopus, and mammalian systems. Several features of this pathway are remarkably well conserved in evolution. A key component of the Wnt pathway is the cytoplasmic protein beta-catenin, whose stability is increased as a result of Wnt signaling. Although morphological effects of Wnt-1 in cell culture are seen in only a limited number of cell lines, we show here that responsiveness to Wnt-1 at the biochemical level is a common property of both epithelial and mesenchymal cells. The increased abundance of beta-catenin may have at least two functional consequences, depending on the subcellular localization of the protein. In some cell lines that respond to Wnt-1, there is a significant increase in the beta-catenin fraction associated with the plasma membrane, where the protein acts as a component of cell-cell adhesive junctions. In other cell types, the major effect of Wnt signaling is an increase in the cytosolic pool of beta-catenin. Increased abundance of this pool has recently been correlated with entry of beta-catenin into the nucleus, where the protein forms complexes with Tcf transcription factors and is thought to modulate the expression of specific genes. The dual consequences of Wnt signaling on cell adhesion and/or gene expression provide at least two potential mechanisms by which this key pathway can function in the regulation of morphogenesis.