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 co-activator, serves as downstream element of the Wnt/beta-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 beta-catenin destruction complex APC, Axin and GSK3 are also required to keep TAZ at low levels. TAZ degradation depends on phosphorylated beta-catenin that bridges TAZ to its ubiquitin ligase beta-TrCP. Upon Wnt signaling, escape of beta-catenin from the destruction complex impairs TAZ degradation and leads to concomitant accumulation of beta-catenin and TAZ. At the genome-wide level, a substantial portion of Wnt transcriptional responses are mediated by TAZ. TAZ activation is a general feature of Wnt signaling, and functionally relevant to mediate Wnt-biological effects.