Aberrant activation of the Wnt pathway is observed in numerous cancers, and is particularly important in colon cancer. We demonstrate that Rac1 GTPase can significantly increase the signaling activity of β-catenin in cells with inherent dysregulation of the canonical Wnt signaling pathway. Expression of dominant-negative (N17) Rac1 mutant in colon cancer cells caused a marked inhibition of Wnt signaling, as determined by the TCF/LEF-responsive (TOPFLASH) transcription assay. Expression of a constitutively active (V12) Rac1 mutant caused up to 40-fold induction from the TOPFLASH promoter, and this was dependent on the presence of stabilized β-catenin. This induction was completely blocked by the expression of dominant-negative TCF-4, suggesting that β-catenin and TCF-4 complex formation is required for Rac1-mediated transcription. Furthermore, we show that Cyclin D1, an important biological Wnt target gene, is regulated by Rac1 in a β-catenin/TCF-dependent manner. We observed that Rac1 co-immunoprecipitates with β-catenin and TCF-4 only in its active GTP-bound form. Both cell fractionation studies and fluorescence microscopy indicate that overexpression of V12Rac1 results in increased cytosolic and nuclear expression of β-catenin. Interestingly, mutation of the polybasic region of Rac1, which prevents its nuclear localization, also caused an appreciable decrease in nuclear localization of β-catenin, and effectively abolished its β-catenin-dependent transcription co-activator function. Taken together, our data demonstrate a novel mechanism of Wnt pathway regulation whereby activation of Rac1 amplifies the signaling activity of stabilized/mutated β-catenin by promoting its accumulation in the nucleus, and synergizing with β-catenin to augment TCF/LEF-dependent gene transcription.