Members of the Tcf family of HMG box-containing transcriptional regulators mediate Wnt signalling in the nucleus. Current models suggest that in the absence of Wnt signalling, Tcf interacts with the repressor protein Groucho and suppresses the expression of Wnt targets. Wnt signalling leads to increases in the level of cytoplasmic beta catenin, which enters the nucleus, displaces Tcf from Groucho and leads to transcriptional activation. In order to test this model we have studied the effects of Drosophila Tcf (dTcf) on signalling by Wingless, a Drosophila member of the Wnt family. We show that overexpression of wild-type dTcf during the development and patterning of the wing antagonises Wingless signalling. Furthermore, increases in the concentration of Armadillo, the Drosophila homologue of beta catenin, do not appear to be sufficient to trigger the change from antagonism to activation. This leads us to suggest that the inactivation of the repressive activity of dTcf requires the activity of Wingless in a manner that is independent of Armadillo. We observe that a Groucho molecule devoid of the WD40 repeats can interact with dTcf and acts as a dominant repressor of Wingless signalling in vivo and in vitro. Coexpression of this molecule with dTcf however, does not lead to enhancement of the repressive effects of dTcf alone. This observation suggests that repression by dTcf might not simply be mediated by an interaction with Groucho but that dTcf may have an intrinsic repressive activity that has to be antagonised by Wingless signalling.