The pharyngeal pouches, which form by budding of the foregut endoderm, are essential for segmentation of the vertebrate face. To date, the cellular mechanism and segmental nature of such budding have remained elusive. Here, we find that Wnt11r and Wnt4a from the head mesoderm and ectoderm, respectively, play distinct roles in the segmental formation of pouches in zebrafish. Time-lapse microscopy, combined with mutant and tissue-specific transgenic experiments, reveal requirements of Wnt signaling in two phases of endodermal epithelial transitions. Initially, Wnt11r and Rac1 destabilize the endodermal epithelium to promote the lateral movement of pouch-forming cells. Next, Wnt4a and Cdc42 signaling induce the rearrangement of maturing pouch cells into bilayers through junctional localization of the Alcama immunoglobulin-domain protein, which functions to restabilize adherens junctions. We propose that this dynamic control of epithelial morphology by Wnt signaling may be a common theme for the budding of organ anlagen from the endoderm.