Mice with a null mutation in the cell surface heparan sulfate (HS) proteoglycan, syndecan-1 (Sdc1), develop almost normally, but resist mammary tumor development in response to Wnt-1. Here, we test the hypothesis that Sdc1 promotes Wnt-1-induced tumor development by interacting with the Wnt cell surface signaling complex. Thus, the response of Sdc1-/- mammary epithelial cells (mecs) to the intracellular, activated Wnt signal transducer, DeltaNbeta-catenin, was assayed both in vitro and in vivo, to test whether beta-catenin/TCF transactivation was Sdc1-independent. Surprisingly, we found that the expression of a canonical Wnt pathway reporter, TOP-FLASH, was reduced by 50% in both unstimulated Sdc1-/- mecs and in stimulated cells responding to Wnt1 or DeltaNbeta-catenin. Tumor development in response to DeltaNbeta-catenin was also significantly delayed on a Sdc1-/- background. Furthermore, the average beta-catenin/TCF transactivation per cell was normal in Sdc1-/- mec cultures, but the number of responsive cells was reduced by 50%. Sdc1-/- mecs show compensatory changes that maintain the number of HS chains, hence these experiments cannot test the coreceptor activity of HS for Wnt signaling. We propose that TCF-dependent transactivational activity is suppressed in 50% of cells in Sdc1-/- glands, and conclude that the major effect of Sdc1 does not map to the activity of the Wnt signaling complex, but to another pathway to create or stabilize the beta-catenin/TCF-responsive tumor precursor cells in mouse mammary gland.