In Drosophila embryos the protein Naked cuticle (Nkd) limits the effects of
the Wnt signal Wingless (Wg) during early segmentation. nkd loss of functi
on results in segment polarity defects and embryonic death, but how nkd aff
ects Wnt signaling is unknown. Using ectopic expression, we find that Nkd a
ffects, in a cell-autonomous manner, a transduction step between the Wnt si
gnaling components Dishevelled (Dsh) and Zeste-white 3 kinase (Zw3). Zw3 is
essential far repressing Wg target-gene transcription in the absence of a
Wg signal, and the role of Wg is to relieve this inhibition. Our double-mut
ant analysis shows that, in contrast to Zw3, Nkd acts when the Wg pathway i
s active to restrain signal transduction. Yeast two hybrid and in vitro exp
eriments indicate that Nkd directly binds to the basic-PDZ region of Dsh. S
pecially timed Nkd overexpression is capable of abolishing Dsh function in
a distinct signaling pathway that controls planar-cell polarity. Our result
s suggest that Nkd acts directly through Dsh to limit Wg activity and thus
determines how efficiently Wnt signals stabilize Armadillo (Arm)/beta -cate
nin and activate downstream genes.