Self-renewal of rodent embryonic stem cells is enhanced by partial inhibition of 
glycogen synthase kinase-3 (Gsk3; refs 1, 2). This effect has variously been 
attributed to stimulation of Wnt signalling by β-catenin, stabilization of Myc 
protein and global de-inhibition of anabolic processes. Here we demonstrate that 
β-catenin is not necessary for embryonic stem cell identity or expansion, but 
its absence eliminates the self-renewal response to Gsk3 inhibition. 
Responsiveness is fully restored by truncated β-catenin lacking the 
carboxy-terminal transactivation domain. However, requirement for Gsk3 
inhibition is dictated by expression of T-cell factor 3 (Tcf3) and mediated by 
direct interaction with β-catenin. Tcf3 localizes to many pluripotency genes in 
embryonic stem cells. Our findings confirm that Tcf3 acts as a transcriptional 
repressor and reveal that β-catenin directly abrogates Tcf3 function. We 
conclude that Gsk3 inhibition stabilizes the embryonic stem cell state primarily 
by reducing repressive influence on the core pluripotency network.