Members of the Wnt family are secreted glycoproteins that trigger cellular signals essential for proper development of organisms. Cellular signaling induced by Wnt proteins is involved in diverse developmental processes and human diseases. Previous studies have generated an enormous wealth of knowledge on the events in signal-receiving cells. However, relatively little is known about the making of Wnt in signal-producing cells. Here, we describe that Gpr177, the mouse orthologue of Drosophila Wls, is expressed during formation of embryonic axes. Embryos with deficient Gpr177 exhibit defects in establishment of the body axis, a phenotype highly reminiscent to the loss of Wnt3. Although many different mammalian Wnt proteins are required for a wide range of developmental processes, the Wnt3 ablation exhibits the earliest developmental abnormality. This suggests that the Gpr177-mediated Wnt production cannot be substituted. As a direct target of Wnt, Gpr177 is activated by β-catenin and LEF/TCF-dependent transcription. This activation alters the cellular distributions of Gpr177 which binds to Wnt proteins and assists their sorting and secretion in a feedback regulatory mechanism. Our findings demonstrate that the loss of Gpr177 affects Wnt production in the signal-producing cells, leading to alterations of Wnt signaling in the signal-receiving cells. A reciprocal regulation of Wnt and Gpr177 is essential for the patterning of the anterior-posterior axis during mammalian development.