The dorsal cell fate determination factor β-catenin and its antagonist, the ventral cell fate determination factor Xom, are expressed and distributed in a polarized fashion during early vertebrate embryogenesis. Ubiquitin-mediated proteolysis has been shown to control the abundance of both β-catenin and Xom. However, the mechanism of ubiquitin-mediated proteolysis in regulating dorsoventral patterning remains largely unclear. Our current study shows that Xom induces proteolysis of β-catenin through GSK3-mediated phosphorylation of Ser33/37 of β-catenin. Our findings reveal a novel pathway that regulates β-catenin stability, and suggest, for the first time, a critical function of ubiquitin-mediated proteolysis in balancing the integration of dorsal-ventral signals and the polarized distribution of β-catenin and Xom during dorsoventral axis formation.