One aspect of the function of the beta-arrestins is to serve as scaffold or adapter molecules coupling G-protein coupled receptors (GPCRs) to signal transduction pathways distinct from traditional second messenger pathways. Here we report the identification of Dishevelled 1 and Dishevelled 2 (Dvl1 and Dvl2) as beta-arrestin1 (betaarr1) interacting proteins. Dvl proteins participate as key intermediates in signal transmission from the seven membrane-spanning Frizzled receptors leading to inhibition of glycogen synthase kinase-3beta (GSK-3beta), stabilization of beta-catenin, and activation of the lymphoid enhancer factor (LEF) transcription factor. We find that phosphorylation of Dvl strongly enhances its interaction with betaarr1, suggesting that regulation of Dvl phosphorylation and subsequent interaction with betaarr1 may play a key role in the activation of the LEF transcription pathway. Because coexpression of the Dvl kinases, CK1epsilon and PAR-1, with Dvl synergistically activates LEF reporter gene activity, we reasoned that coexpression of betaarr1 with Dvl might also affect LEF-dependent gene activation. Interestingly, whereas betaarr1 or Dvl alone leads to low-level stimulation of LEF (2- to 5-fold), coexpression of betaarr1 with either Dvl1 or Dvl2 leads to a synergistic activation of LEF (up to 16-fold). Additional experiments with LiCl as an inhibitor of GSK-3beta kinase activity indicate that the step affected by betaarr1 is upstream of GSK-3beta and most likely at the level of Dvl. These results identify betaarr1 as a regulator of Dvl-dependent LEF transcription and suggest that betaarr1 might serve as an adapter molecule that can couple Frizzled receptors and perhaps other GPCRs to these important transcription pathways.