Dapper, Dishevelled-associated antagonist of β-catenin (DACT), is involved in Xenopus embryonic development. Human DACT2 is localized on chromosome 6q27, a region of frequent loss of heterozygosity (LOH) in human cancers. However, the function and regulation of DACT2 in human lung cancer remain unclear. DNA sequencing, methylation-specific PCR (MSP), semi-quantitative RT-PCR, western blotting, and xenograft models were employed in this study. Eight lung cancer cell lines, 106 cases of primary lung cancer, four specimens of normal lung from patients without cancer, and 99 blood samples from healthy individuals were examined. We found that while there was no SNP related to lung cancer, the DACT2 promoter region is frequently methylated in human lung cancer. DACT2 is silenced by promoter region hypermethylation and re-expressed by 5-aza-2'-deoxyazacytidine treatment of lung cancer cell lines. Methylation of DACT2 was associated with poor differentiation of lung cancer. Loss of DACT2 expression was associated with promoter region hypermethylation in primary lung cancer, and was associated with increased β-catenin expression. Restoration of DACT2 expression suppressed tumour proliferation both in vitro and in vivo. DACT2 expression was down-regulated by siRNA knockdown in H727 cells. DACT2 inhibited T-cell factor/lymphoid enhancer factor (TCF/LEF) and its downstream genes. In conclusion, DACT2 methylation is a potential lung cancer detection marker. DACT2 is regulated by promoter region hypermethylation. DACT2 inhibits lung cancer proliferation by suppressing the Wnt signalling pathway in lung cancer.