Frizzled receptors transduce signals from the extracellular Wnt ligands through multiple signaling pathways that affect cytoskeletal organization and regulate gene expression. Direct intracellular mediators of Frizzled signaling are largely unknown. We identified FRIED (Frizzled interaction and ectoderm defects) by its association with the C-terminal PDZ-binding motif of Xenopus Frizzled 8. FRIED contains an N-terminal KIND domain, a FERM domain, six PDZ domains, and a tyrosine phosphatase domain, being similar in structure to the protein tyrosine phosphatase PTP-BAS/PTP-BL. We report that FRIED proteins with the FERM domain localize to the apical cortex and can inhibit Wnt8-mediated, but not β-catenin-mediated, secondary axis induction in Xenopus embryos, suggesting a specific interaction with Wnt signaling. A FRIED construct containing the FERM domain induced reorganization of pigment granules and cortical actin in Xenopus ectoderm. Wnt5a suppressed the depigmentation of ectoderm triggered by FRIED, demonstrating that Wnt5a and FRIED functionally interact to regulate the cytoskeletal organization. Our data are consistent with the possibility that FRIED functions by modulating Rac1 activity. We propose that FRIED is an adaptor protein that serves as a molecular link between Wnt signaling and actin cytoskeleton.