Synapse formation requires proper interaction between pre- and postsynaptic cells. In anterograde signaling, neurons release factors to guide postsynaptic differentiation. However, less is known about how postsynaptic targets retrogradely regulate presynaptic differentiation or function. We found that muscle-specific conditional knockout of β-catenin (Ctnnb1, also known as β-cat) in mice caused both morphologic and functional defects in motoneuron terminals of neuromuscular junctions (NMJs). In the absence of muscle β-catenin, acetylcholine receptor clusters were increased in size and distributed throughout a wider region. Primary nerve branches were mislocated, whereas secondary or intramuscular nerve branches were elongated and reduced in number. Both spontaneous and evoked neurotransmitter release was reduced at the mutant NMJs. Furthermore, short-term plasticity and calcium sensitivity of neurotransmitter release were compromised in β-catenin–deficient muscle. In contrast, the NMJ was normal in morphology and function in motoneuron-specific β-catenin–deficient mice. Taken together, these observations indicate a role for muscle β-catenin in presynaptic differentiation and function, identifying a previously unknown retrograde signaling in the synapse formation and synaptic plasticity.