Wnt/Wingless (Wg) signaling is one of the major molecular pathways regulating formation of the anterio-posterior (AP) axis in the developing embryo. Almost every organism in the animal kingdom requires Wnt signaling to establish the AP axis, the exception to this rule is the common fruit fly. This thesis will examine the role of Wnt/Wg in the early Drosophila embryo and show that while modern flies may not depend on posterior Wg expression, its expression is still regulated suggesting Wnt may play a role in refinement of the AP axis and likey had a more significant role prior to the divergence of the species. During Wnt signal transduction GSK3 phosphorylation of [beta]-Catenin is inhibited, however, it remained unclear how this inhibition occurred. This thesis reveals a novel mechanism of GSK3 inhibition by sequestration into multivesicular bodies (MVB). We show that Wnt signaling causes GSK3 to be relocalized inside MVBs where the enzyme can no longer interact with [beta]-Catenin to cause its degradation. We also show that many proteins, in addition to [beta]-Catenin, are also stabilized. We explore the identity of these proteins using stable isotope labeling by amino acids in cell culture (SILAC) and tandem mass-spectrometry analysis. Finally, we introduce a new Drosophila cell line, ML-DmBG3-c2, that could aide in our understanding of the role of vesicle trafficking in transduction of the Wnt/Wg signal. The work presented in this thesis contributed to the field of developmental biology and Wnt/Wg signaling by 1) highlighting the posterior expression of Wg in Drosophila embryo development and its potential for refinement of the A-P axis, 2) revealing the mechanism for GSK3 inhibition through sequestration into MVBs which leads to stabilization of many proteins which effect many cellular processes, and 3) identifying a novel cell line with great potential for investigating the role of endocytosis and Wnt signaling. While these studies offer some contribution, continued research into the of the role of Wnt in embryo development and mechanism of signal transduction will help to improve the treatments for birth defects and many types of cancers.