Müllerian-inhibiting substance (MIS), which is produced by fetal Sertoli cells shortly after commitment of the bipotential gonads to testicular differentiation, causes Müllerian duct (MD) regression. In the fetal female gonads, MIS is not expressed and the MDs will differentiate into the internal female reproductive tract. We have investigated whether dysregulated β-catenin activity affects MD regression by expressing a constitutively activated nuclear form of β-catenin in the MD mesenchyme. We show that constitutively activated (CA) β-catenin causes focal retention of MD tissue in the epididymides and vasa deferentia. In adult mutant mice, the retained MD tissues express α-smooth muscle actin and desmin, which are markers for uterine differentiation. MD retention inhibited the folding complexity of the developing epididymides and usually led to obstructive azoospermia by spermatoceles. The MDs of urogenital ridges from mutant female embryos showed less regression with added MIS in organ culture compared with control MDs when analyzed by whole mount in situ hybridization for Wnt7a as a marker for the MD epithelium. CA β-catenin did not appear to affect expression of either MIS in the embryonic testes or its type II receptor (AMHR2) in the MD mesenchyme nor did it inhibit pSmad1/5/8 nuclear accumulation, suggesting that dysregulated β-catenin must inhibit MD regression independently of MIS signaling. These studies suggest that dysregulated Wnt/β-catenin signaling in the MD mesenchyme might also be a contributing factor in persistent Müllerian duct syndrome, a form of male pseudohermaphroditism, and development of spermatoceles.