Cyto-nuclear shuttling of β-catenin is at the epicenter of the canonical Wnt pathway and mutations in genes that result in excessive nuclear accumulation of β-catenin are the driving force behind the initiation of many cancers. Recently, Naked Cuticle homolog 1 (Nkd1) has been identified as a Wnt-induced intracellular negative regulator of canonical Wnt signaling. The current model suggests that Nkd1 acts between Disheveled (Dvl) and β-catenin. Here, we employ the zebrafish embryo to characterize the cellular and biochemical role of Nkd1 in vivo. We demonstrate that Nkd1 binds to β-catenin and prevents its nuclear accumulation. We also show that this interaction is conserved in mammalian cultured cells. Further, we demonstrate that Nkd1 function is dependent on its interaction with the cell membrane. Given the conserved nature of Nkd1, our results shed light on the negative feedback regulation of Wnt signaling through the Nkd1-mediated negative control of nuclear accumulation of β-catenin.