The canonical Wnt signalling pathway is essential for cell fate determination during embryonic development and for the maintenance of adult tissue homeostasis. Deregulation of Wnt signalling leads to developmental defects and is associated with various types of cancer. Here we have used an RNA interference (RNAi) library specifically targeting human deubiquitinating enzymes (DUBs) to screen for new regulators of the canonical Wnt signalling pathway. We found that suppression of the ubiquitin specific protease 4 (USP4) activates β-catenin dependent transcription. We also show that USP4 is a DUB with dual hydrolysing activity for K48- and K63-conjugated polyubiquitin chains and interacts with two known Wnt signalling components: the Nemo like kinase (Nlk) and the transcription factor (T-cell factor 4 [TCF4]). Overexpression of a catalytically active Nlk promotes nuclear accumulation of USP4 whereas a subpopulation of TCF4 is a substrate of USP4-dependent deubiquitination. Thus, modulation of USP4 expression may provide a new means to interfere with canonical Wnt signalling in a variety of physiological and pathological conditions.