Wnt signaling specifies cell fates in many tissues during vertebrate and invertebrate embryogenesis. To understand better how Wnt signaling is regulated during development, we have performed genetic screens to isolate mutations that suppress or enhance mutations in the fly Wnt homolog, wingless (wg). We find that loss-of-function mutations in the neural determinant SoxNeuro (also known as Sox-neuro,SoxN) partially suppress wg mutant pattern defects. SoxN encodes a HMG-box-containing protein related to the vertebrate Sox1, Sox2 and Sox3 proteins, which have been implicated in patterning events in the early mouse embryo. In Drosophila, SoxN has previously been shown to specify neural progenitors in the embryonic central nervous system. Here, we show that SoxN negatively regulates Wg pathway activity in the embryonic epidermis. Loss of SoxN function hyperactivates the Wg pathway, whereas its overexpression represses pathway activity. Epistasis analysis with other components of the Wg pathway places SoxN at the level of the transcription factor Pan (also known as Lef, Tcf) in regulating target gene expression. In human cell culture assays, SoxN represses Tcf-responsive reporter expression, indicating that the fly gene product can interact with mammalian Wnt pathway components. In both flies and in human cells, SoxN repression is potentiated by adding ectopic Tcf, suggesting that SoxN interacts with the repressor form of Tcf to influence Wg/Wnt target gene transcription.