The mouse Wnt-1 gene plays an essential role in fetal brain development and can contribute to tumorigenesis when activated aberrantly in the mammary gland. The gene encodes secretory glycoproteins associated with the extracellular or pericellular matrix, and it has been proposed that Wnt-1, as well as its Drosophila homolog wingless, may function in intercellular signalling. We show here that fibroblasts expressing Wnt-1 protein, although not transformed themselves, are able to elicit morphological transformation of neighboring C57MG mammary epithelial cells in coculture experiments. Heparin inhibits this effect, possibly by displacing Wnt-1 protein from its normal site of action. Our results indicate that the Wnt-1 gene can act via a paracrine mechanism in cell culture and strongly support the notion that in vivo the gene may function in cell-to-cell communication.