Wnt growth factors are fundamental regulators of cell fate, but how the Wnt signal is translated into biological responses is incompletely understood. Here, we report that TAZ, a biologically potent transcriptional coactivator, serves as a downstream element of the Wnt/β-catenin cascade. This function of TAZ is independent from its well-established role as mediator of Hippo signaling. In the absence of Wnt activity, the components of the β-catenin destruction complex--APC, Axin, and GSK3--are also required to keep TAZ at low levels. TAZ degradation depends on phosphorylated β-catenin that bridges TAZ to its ubiquitin ligase β-TrCP. Upon Wnt signaling, escape of β-catenin from the destruction complex impairs TAZ degradation and leads to concomitant accumulation of β-catenin and TAZ. At the genome-wide level, a substantial portion of Wnt transcriptional responses is mediated by TAZ. TAZ activation is a general feature of Wnt signaling and is functionally relevant to mediate Wnt biological effects.