The establishment and stability of cell fates during development depend on the integration of multiple signals, which ultimately modulate specific patterns of gene expression. While there is ample evidence for this integration at the level of gene regulatory sequences, little is known about its operation at other levels of cellular activity. Wnt and Notch signalling are important elements of the circuitry that regulates gene expression in development and disease. Genetic analysis has suggested that in addition to convergence on the transcription of specific genes, there are modulatory cross-regulatory interactions between these signalling pathways. We report that the nodal point of these interactions is an activity of Notch that regulates the activity and the amount of the active/oncogenic form of Armadillo/beta-catenin. This activity of Notch is independent of that induced upon cleavage of its intracellular domain and which mediates transcription through Su(H)/CBF1. The modulatory function of Notch described here, contributes to the establishment of a robust threshold for Wnt signalling which is likely to play important roles in both normal and pathological situations.