β-Catenin, as an important effector of the canonical Wnt signaling pathway and as a regulator of cell adhesion, has been demonstrated to be involved in multiple developmental processes and tumorigenesis. β-Catenin expression was found mainly on the Sertoli cell membrane starting from embryonic day 15.5 in the developing testes. However, its potential role in Sertoli cells during testis formation has not been examined. To determine the function of β-catenin in Sertoli cells during testis formation, we either deleted β-catenin or expressed a constitutively active form ofβ-catenin in Sertoli cells. We found that deletion caused no detectable abnormalities. However, stabilization caused severe phenotypes, including testicular cord disruption, germ cell depletion and inhibition of Müllerian duct regression. β-Catenin stabilization caused changes in Sertoli cell identity and misregulation of inter-Sertoli cell contacts. As Wt1 conditional knockout in Sertoli cells causes similar phenotypes to our stabilized β-catenin mutants, we then investigated the relationship of Wt1 and β-catenin in Sertoli cells and found Wt1 inhibits β-catenin signaling in these cells during testis development. Wt1 deletion resulted in upregulation of β-catenin expression in Sertoli cells both in vitro and in vivo. Our study indicates that Sertoli cell expression of β-catenin is dispensable for testis development. However, the suppression of β-catenin signaling in these cells is essential for proper testis formation and Wt1 is a negative regulator of β-catenin signaling during this developmental process.