The adenomatous polyposis coli (APC) tumour suppressor is a multifunctional protein involved in the regulation of Wnt signalling and cytoskeletal dynamics. Little is known about how APC controls these disparate functions. In this study, we have used APC-and axin-fluorescent fusion proteins to examine the interactions between these proteins and show that the functionally distinct populations of APC are also spatially separate. Axin-RFP forms cytoplasmic punctate structures, similar to endogenous axin puncta. Axin-RFP recruits b-catenin destruction complex proteins, including APC, b-catenin, glycogen synthase kinase-3-b (GSK3-b) and casein kinase-1-a (CK1-a). Recruitment into axin-RFP puncta sequesters APC from clusters at cell extensions and this prevents its microtubule-associated functions. The interaction between APC-GFP and axin-RFP within the cytoplasmic puncta is direct and dramatically alters the dynamic properties of APC-GFP. However, recruitment of APC to axin puncta is not absolutely required for b-catenin degradation. Instead, formation of axin puncta, mediated by the DIX domain, is required for b-catenin degradation. An axinDDIX mutant did not form puncta, but still mediated recruitment of destruction complex proteins and phosphorylation of b-catenin. We conclude that there are distinct pools of APC and that the formation of axin puncta, rather than the axin/APC complex, is essential for b-catenin destruction.