Axin is a key scaffolding protein responsible for the formation of the β-catenin destruction complex. Stability of Axin protein is regulated by the ubiquitin-proteasome system, and modulation of cellular concentration of Axin protein has a profound effect on Wnt/β-catenin signaling. Although E3s promoting Axin ubiquitination have been identified, the deubiquitinase responsible for Axin deubiquitination and stabilization remains unknown. Here, we identify USP7 as a potent negative regulator of Wnt/β-catenin signaling through CRISPR screens. Genetic ablation or pharmacological inhibition of USP7 robustly increases Wnt/β-catenin signaling in multiple cellular systems. USP7 directly interacts with Axin through its TRAF domain, and promotes deubiquitination and stabilization of Axin. Inhibition of USP7 regulates osteoblast differentiation and adipocyte differentiation through increasing Wnt/β-catenin signaling. Our study reveals a critical mechanism that prevents excessive degradation of Axin and identifies USP7 as a target for sensitizing cells to Wnt/β-catenin signaling.