In Drosophila, naked cuticle is an inducible antagonist of the Wnt-β-catenin pathway, likely acting at the level of Dishevelled (Dsh/Dvl), an essential component of this pathway. The mechanism by which naked cuticle and its two vertebrate orthologs, Naked1 (NKD1) and Naked2 (NKD2), inhibit Dvl function is unknown. NKD2 is myristoylated, a co-translational modification that leads to its plasma membrane localization. In contrast, myristoylation- deficient G2A NKD2 is cytoplasmic. Here in we show that the ability of Nkd2/NKD2 to antagonize Wnt-β-catenin activity during zebrafish embryonic development and in mammalian HEK293 cells is myristoylation-dependent. NKD2 and Dvl-1 interact and co-localize at the lateral membrane of polarized epithelial cells. In reciprocal overexpression and siRNA knockdown experiments, NKD2and Dvl-1 destabilize each other via enhanced polyubiquitylation; this effect is also dependent upon Naked2 myristoylation. Cell fractionation and ubiquitylation assays indicate that endogenous NKD2 interacts with a slower migrating, ubiquitylated form of Dvl-1 in plasma membrane fractions. These results provide a mechanism by which NKD2 antagonizes Wnt signaling: myristoylated NKD2 interacts with Dvl-1 at the plasma membrane, and this interaction leads to their mutual ubiquitin-mediated proteasomal degradation.