Wnt proteins control diverse biological processes through β-catenin-dependent canonical signalling and β-catenin-independent non-canonical signalling. The mechanisms by which these signalling pathways are differentially triggered and controlled are not fully understood. Dishevelled (Dvl) is a scaffold protein that serves as the branch point of these pathways. Here, we show that cholesterol selectively activates canonical Wnt signalling over non-canonical signalling under physiological conditions by specifically facilitating the membrane recruitment of the PDZ domain of Dvl and its interaction with other proteins. Single-molecule imaging analysis shows that cholesterol is enriched around the Wnt-activated Frizzled and low-density lipoprotein receptor-related protein 5/6 receptors and plays an essential role for Dvl-mediated formation and maintenance of the canonical Wnt signalling complex. Collectively, our results suggest a new regulatory role of cholesterol in Wnt signalling and a potential link between cellular cholesterol levels and the balance between canonical and non-canonical Wnt signalling activities.