Wnts are secreted signaling proteins that regulate developmental processes. Here we show that Wnt signaling, likely mediated by Wnt-10b, is a molecular switch that governs adipogenesis. Wnt signaling maintains preadipocytes in an undifferentiated state through inhibition of the adipogenic transcription factors CCAAT/enhancer binding protein alpha (C/EBPalpha) and peroxisome proliferator- activated receptor gamma (PPARgamma). When Wnt signaling in preadipocytes is prevented by overexpression of Axin or dominant-negative TCF4, these cells differentiate into adipocytes. Disruption of Wnt signaling also causes transdifferentiation of myoblasts into adipocytes in vitro, highlighting the importance of this pathway not only in adipocyte differentiation but also in mesodermal cell fate determination.