Small ubiqutin-related modifier (SUMO), which is responsible for the ubiquitination-like post-translational modification 'sumoylation', regulates a number of biological processes including, in particular, transcription. The rat protein Axam, which possesses SUMO-specific protease activity, was shown to inhibit the Wnt signalling pathway. Several other components of the pathway are also sumoylated, so the mechanism of this modification has itself been linked to Wnt signalling. However, the functional interactions between SUMO and Wnt signalling are not well understood. This study identified a novel SUMO-specific protease in Xenopus, which was denoted XSENP1. The C-terminus of XSENP1 is highly conserved across the SUMO-specific protease family, and in vitro XSENP1 possesses hydrolase and desumoylation activity. Over-expression of XSENP1 in vivo inhibited dorso-anterior development of Xenopus embryos and suppressed Wnt signalling target gene expression in a manner similar to Axam. Deletion analysis of XSENP1 showed that inhibition of the Wnt signalling pathway requires protease activity. Moreover, XSENP1 inhibits ectopic axis induction by Dvl, beta-catenin and the constitutively active form of beta-catenin, but not by siamois. These results indicate that the dorsal expression of XSENP1 obstructs head development in Xenopus laevis and that this effect may result from inhibition of the canonical Wnt pathway downstream of beta-catenin, but upstream of siamois.