Secreted Wnt proteins play pivotal roles in development, including regulation of cell proliferation, differentiation, progenitor maintenance and tissue patterning. The transmembrane protein Wntless (Wls) is necessary for secretion of most Wnts and essential for effective Wnt signaling. During a mutagenesis screen to identify genes important for development of the habenular nuclei in the dorsal forebrain, we isolated a mutation in the sole wls gene of zebrafish and confirmed its identity with a second, independent allele. Early embryonic development appears normal in homozygous wls mutants, but they later lack the ventral habenular nuclei, form smaller dorsal habenulae and otic vesicles, have truncated jaw and fin cartilages and lack swim bladders. Activation of a reporter for β-catenin-dependent transcription is decreased in wls mutants, indicative of impaired signaling by the canonical Wnt pathway, and expression of Wnt-responsive genes is reduced in the dorsal diencephalon. Wnt signaling was previously implicated in patterning of the zebrafish brain and in the generation of left-right (L-R) differences between the bilaterally paired dorsal habenular nuclei. Outside of the epithalamic region, development of the brain is largely normal in wls mutants and, despite their reduced size, the dorsal habenulae retain L-R asymmetry. We find that homozygous wls mutants show a reduction in two cell populations that contribute to the presumptive dorsal habenulae. The results support distinct temporal requirements for Wls in habenular development and reveal a new role for Wnt signaling in the regulation of dorsal habenular progenitors.