Parathyroid hormone-related protein (PTHrP) regulates cell fate and specifies the mammary mesenchyme during embryonic development. Loss of PTHrP or its receptor (Pthr1) abolishes the expression of mammary mesenchyme markers and allows mammary bud cells to revert to an epidermal fate. By contrast, overexpression of PTHrP in basal keratinocytes induces inappropriate differentiation of the ventral epidermis into nipple-like skin and is accompanied by ectopic expression of Lef1, β-catenin and other markers of the mammary mesenchyme. In this study, we document that PTHrP modulates Wnt/β-catenin signaling in the mammary mesenchyme using a Wnt signaling reporter, TOPGAL-C. Reporter expression is completely abolished by loss of PTHrP signaling and ectopic reporter activity is induced by overexpression of PTHrP. We also demonstrate that loss of Lef1, a key component of the Wnt pathway, attenuates the PTHrP-induced abnormal differentiation of the ventral skin. To characterize further the contribution of canonical Wnt signaling to embryonic mammary development, we deleted β-catenin specifically in the mammary mesenchyme. Loss of mesenchymal β-catenin abolished expression of the TOPGAL-C reporter and resulted in mammary buds with reduced expression of mammary mesenchyme markers and impaired sexual dimorphism. It also prevented the ectopic, ventral expression of mammary mesenchyme markers caused by overexpression of PTHrP in basal keratinocytes. Therefore, we conclude that a mesenchymal, canonical Wnt pathway mediates the PTHrP-dependent specification of the mammary mesenchyme.