The expression of cytochrome P450 (CYP) 1a1 and other drug-metabolizing enzymes is controlled by the aryl hydrocarbon receptor (AhR), which is activated by dioxin-type inducers leading to transcriptional induction of target genes. Here, we show that a second level of transcriptional control exists in hepatocytes, which is tightly linked to the Wnt/β-catenin/T-cell factor (TCF) signaling pathway. In transgenic mice, hepatic expression of CYP1A (and other CYP isoforms) is stimulated by the expression of mutationally activated β-catenin(S33Y) in the absence of AhR-activating compounds but repressed after knockout of β-catenin. These effects were further analyzed in vitro, and the stimulatory role of β-catenin was ascribed to a TCF-binding site within the CYP1A1 promoter. Moreover, β-catenin signaling acted cooperatively with AhR agonists via AhR-binding sites on the DNA during the induction of Cyp1a1 in vivo and in vitro. Activation of β-catenin enhanced the transactivation potential of ligand-activated AhR at its DNA-binding sites without altering the total amount of DNA-bound AhR. Coimmunoprecipitation demonstrated a physical interaction between AhR and β-catenin. Furthermore, the present results suggest that transcriptional induction of the AhR by β-catenin does not play a major role in β-catenin-dependent regulation of Cyp1a1 expression and that inhibition of β-catenin signaling by ligand-activated AhR, as recently observed in the intestine does not occur in mouse liver. In conclusion, signaling through β-catenin activates basal CYP1A1 expression and augments CYP1A1 induction by AhR ligands through enhancement of the transactivation potential of the AhR.