Secreted Frizzled-related protein-1 (sFRP-1) contains a cysteine-rich domain homologous to the putative Wnt-binding site of Frizzleds. To facilitate the biochemical and biological analysis of sFRP-1, we developed a mammalian recombinant expression system that yields approximately 3 mg of purified protein/liter of conditioned medium. Using this recombinant protein, we demonstrated that sFRP-1 and Wg (wingless) interact in enzyme-linked immunosorbent and co-precipitation assays. Surprisingly, a derivative lacking the cysteine-rich domain retained the ability to bind Wg. Cross-linking experiments performed with radioiodinated sFRP-1 provided definitive evidence that sFRP-1 and Wg bind directly to each other. Besides detecting a cross-linked complex consistent in size with 1:1 stoichiometry of sFRP-1 and Wg, we also observed a larger complex whose size suggested the presence of a second sFRP-1 molecule. The formation of both complexes was markedly enhanced by an optimal concentration of exogenous heparin, emphasizing the potential importance of heparan-sulfate proteoglycan in Wnt binding and signaling. sFRP-1 exerted a biphasic effect on Wg activity in an armadillo stabilization assay, increasing armadillo level at low concentrations but reducing it at higher concentrations. These results provide new insights about the Wnt binding and biological activity of sFRPs.