Signalling by Wnt proteins is finely balanced to ensure normal development and 
tissue homeostasis while avoiding diseases such as cancer. This is achieved in 
part by Notum, a highly conserved secreted feedback antagonist. Notum has been 
thought to act as a phospholipase, shedding glypicans and associated Wnt 
proteins from the cell surface. However, this view fails to explain specificity, 
as glypicans bind many extracellular ligands. Here we provide genetic evidence 
in Drosophila that Notum requires glypicans to suppress Wnt signalling, but does 
not cleave their glycophosphatidylinositol anchor. Structural analyses reveal 
glycosaminoglycan binding sites on Notum, which probably help Notum to 
co-localize with Wnt proteins. They also identify, at the active site of human 
and Drosophila Notum, a large hydrophobic pocket that accommodates palmitoleate. 
Kinetic and mass spectrometric analyses of human proteins show that Notum is a 
carboxylesterase that removes an essential palmitoleate moiety from Wnt proteins 
and thus constitutes the first known extracellular protein deacylase.