Lower lobe predominant pulmonary cysts occur in up to 90% of patients with Birt-Hogg-Dubé (BHD) syndrome, but the key pathologic cell type and signaling events driving this distinct phenotype remain elusive. Through examination of the LungMAP database, we found that folliculin (FLCN) is highly expressed in neonatal lung mesenchymal cells. Using RNA-Seq, we found that inactivation of Flcn in mouse embryonic fibroblasts leads to changes in multiple Wnt ligands, including a 2.8-fold decrease in Wnt2. This was associated with decreased TCF/LEF activity, a readout of canonical WNT activity, after treatment with a GSK3-α/β inhibitor. Similarly, FLCN deficiency in HEK293T cells decreased WNT pathway activity by 76% post-GSK3-α/β inhibition. Inactivation of FLCN in human fetal lung fibroblasts (MRC-5) led to ~ 100-fold decrease in Wnt2 expression and a 33-fold decrease in Wnt7b expression-two ligands known to be necessary for lung development. Furthermore, canonical WNT activity was decreased by 60%. Classic WNT targets such as AXIN2 and BMP4, and WNT enhanceosome members including TCF4, LEF1 and BCL9 were also decreased after GSK3-α/β inhibition. FLCN-deficient MRC-5 cells failed to upregulate LEF1 in response to GSK3-α/β inhibition. Finally, we found that a constitutively active β-catenin could only partially rescue the decreased WNT activity phenotype seen in FLCN-deficient cells, whereas silencing the transcription factor TFE3 completely reversed this phenotype. In summary, our data establish FLCN as a critical regulator of the WNT pathway via TFE3 and suggest that FLCN-dependent defects in WNT pathway developmental cues may contribute to lung cyst pathogenesis in BHD.