Inflammatory cytokines have been proposed to regulate epithelial homeostasis during intestinal inflammation. We report here that interferon-γ (IFN-γ) regulates the crucial homeostatic functions of cell proliferation and apoptosis through serine-threonine protein kinase AKT-β-catenin and Wingless-Int (Wnt)-β-catenin signaling pathways. Short-term exposure of intestinal epithelial cells to IFN-γ resulted in activation of β-catenin through AKT, followed by induction of the secreted Wnt inhibitor Dkk1. Consequently, we observed an increase in Dkk1-mediated apoptosis upon extended IFN-γ treatment and reduced proliferation through depletion of the Wnt coreceptor LRP6. These effects were enhanced by tumor necrosis factor-α (TNF-α), suggesting synergism between the two cytokines. Consistent with these results, colitis in vivo was associated with decreased β-catenin-T cell factor (TCF) signaling, loss of plasma membrane-associated LRP6, and reduced epithelial cell proliferation. Proliferation was partially restored in IFN-γ-deficient mice. Thus, we propose that IFN-γ regulates intestinal epithelial homeostasis by sequential regulation of converging β-catenin signaling pathways. Display omitted ► IFN-γ induces AKT-β-catenin transcriptional activity in intestinal epithelium ► Phosphorylation of β-catenin by AKT is essential to induce Dkk1 expression ► Dkk1 enhances epithelial apoptosis by inhibiting Wnt-β-catenin signaling ► Regulation of β-catenin by AKT and Dkk1 is important for epithelial homeostasis