The Wnt/beta-catenin signaling pathway is critical in both cellular proliferation and organismal development. However, how the beta-catenin degradation complex is inhibited upon Wnt activation remains unclear. Using a directed RNAi screen we find that protein phosphatase 1 (PP1), a ubiquitous serine/threonine phosphatase, is a novel potent positive physiologic regulator of the Wnt/beta-catenin signaling pathway. PP1 expression synergistically activates, and inhibition of PP1 inhibits, Wnt/beta-catenin signaling in Drosophila and mammalian cells as well as in Xenopus embryos. The data suggest that PP1 controls Wnt signaling through interaction with, and regulated dephosphorylation of, axin. Inhibition of PP1 leads to enhanced phosphorylation of specific sites on axin by casein kinase I. Axin phosphorylation markedly enhances the binding of glycogen synthase kinase 3, leading to a more active beta-catenin destruction complex. Wnt-regulated changes in axin phosphorylation, mediated by PP1, may therefore determine beta-catenin transcriptional activity. Specific inhibition of PP1 in this pathway may offer therapeutic approaches to disorders with increased beta-catenin signaling.