Deregulation of the Wnt/β-catenin signaling pathway drives the development of colorectal cancer (CRC) but understanding of this pathway remains incomplete. Here we report that the damage-specific DNA-binding protein DDB2 is critical for β-catenin-mediated activation of RNF43, which restricts Wnt-signaling by removing Wnt receptors from the cell surface. Reduced expression of DDB2 and RNF43 was observed in human hyperplastic colonic foci. DDB2 recruited EZH2 and β-catenin at an upstream site in the Rnf43 gene, enabling functional interaction with distant TCF4/β-catenin binding sites in the intron of Rnf43. This novel activity of DDB2 was required for RNF43 function as a negative feedback regulator of Wnt-signaling. Mice genetically deficient in DDB2 exhibited increased susceptibility to colon tumor development in a manner associated with higher abundance of the Wnt receptor-expressing cells and greater activation of the downstream Wnt-pathway. Our results identify DDB2 as both a partner and regulator of Wnt-signaling with an important role in suppressing colon cancer development.