The canonical Wnt pathway plays an important role in the regulation of cell proliferation and differentiation. Activation of this signaling pathway causes disruption of the Axin/adenomatous polyposis coli/glycogen synthase kinase 3β complex, resulting in stabilization of β-catenin and its association with lymphoid enhancer factor/T-cell factor in the nucleus. Here, we identify Fas-associated factor 1 (FAF1) as a negative regulator of Wnt/β-catenin signaling. We found overexpression of FAF1 to strongly inhibit Wnt-induced transcriptional reporter activity and to counteract Wnt-induced β-catenin accumulation. Moreover, knockdown of FAF1 resulted in an increase in β-catenin levels and in activation of Wnt/β-catenin-induced transcription. FAF1 was found to interact with β-catenin upon inhibition of proteasome. Ectopic expression of FAF1 promoted β-catenin degradation by enhancing its polyubiquitination. Functional studies in C2C12 myoblasts and KS483 preosteoblastic cells showed that FAF1 depletion resulted in activation of endogenous Wnt-induced genes and enhanced osteoblast differentiation, whereas FAF1 overexpression had the opposite effect. These results identify FAF1 as a novel inhibitory factor of canonical Wnt signaling pathway.