Chromosomal translocations juxtaposing the androgen-responsive TMPRSS2 promoter with the ETS-family transcription factor ERG result in aberrant ERG upregulation in approximately 50% of prostate cancers. Studies to date have shown important roles of ERG in inducing oncogenic properties of prostate cancer. Its molecular mechanisms of action, however, are yet to be fully understood. Here, we report that ERG activates Wnt/LEF1 signaling cascade through multiple mechanisms. ERG bound to the promoters of various Wnt genes to directly increase ligand expression. Consequently, ERG overexpression increased active β-catenin level in the cells and enhanced TCF/LEF1 luciferase reporter activity, which could be partially blocked by WNT-3A inhibitor IWP-2. Most importantly, our data defined LEF1 as a direct target of ERG and that LEF1 inhibition fully abolished ERG-induced Wnt signaling and target gene expression. Furthermore, functional assays showed that Wnt/LEF1 activation phenocopied that of ERG in inducing cell growth, epithelial-to-mesenchymal transition, and cell invasion, whereas blockade of Wnt signaling attenuated these effects. Concordantly, LEF1 expression is significantly upregulated in ERG-high human prostate cancers. Overall, this study provides an important mechanism of activation of Wnt signaling in prostate cancer and nominates LEF1 as a critical mediator of ERG-induced tumorigenesis. Wnt/LEF1 pathway might provide novel targets for therapeutic management of patients with fusion-positive prostate cancer. Cancer Res; 73(19); 6068–79. ©2013 AACR.