Background: Dickkopf-1 (Dkk-1) is a head inducer secreted from the vertebrate head organizer and induces anterior development by antagonizing Wnt signaling. Although several families of secreted antagonists have been shown to inhibit Wnt signal transduction by binding to Wnt, the molecular mechanism of Dkk-1 action is unknown. The Wnt family of secreted growth factors initiates signaling via the Frizzled (Fz) receptor and its candidate coreceptor, LDL receptor-related protein 6 (LRP6), presumably through Fz-LRP6 complex formation induced by Wnt. The significance of the Fz-LRP6 complex in signal transduction remains to be established. Results: We report that Dkk-1 is a high-affinity ligand for LRP6 and inhibits Wnt signaling by preventing Fz-LRP6 complex formation induced by Wnt. Dkk-1 binds neither Wnt nor Fz, nor does it affect Wnt-Fz interaction. Dkk-1 function in head induction and Wnt signaling inhibition strictly correlates with its ability to bind LRP6 and to disrupt the Fz-LRP6 association. LRP6 function and Dkk-1 inhibition appear to be specific for the Wnt/Fz β-catenin pathway. Conclusions: Our results demonstrate that Dkk-1 is an LRP6 ligand and inhibits Wnt signaling by blocking Wnt-induced Fz-LRP6 complex formation. Our findings thus reveal a novel mechanism for Wnt signal modulation. LRP6 is a Wnt coreceptor that appears to specify Wnt/Fz signaling to the β-catenin pathway, and Dkk-1, distinct from Wnt binding antagonists, may be a specific inhibitor for Wnt/β-catenin signaling. Our findings suggest that Wnt-Fz-LRP6 complex formation, but not Wnt-Fz interaction, triggers Wnt/β-catenin signaling.