Wnt signaling controls critical developmental processes including tissue/body patterning. Here we report the identification of a novel regulator of Wnt signaling, OTTOGI (OTG), isolated from a large-scale expression screening of human cDNAs in zebrafish embryos. Overexpression of OTG in zebrafish embryos caused dorso-anteriorized phenotype, inhibited the expression of Wnt target genes, and prevented nuclear accumulation of β-catenin. Conversely, knockdown of zebrafish otg using specific antisense morpholino promoted nuclear accumulation of β-catenin and caused ventralization. However, OTG failed to rescue headless-like phenotype induced by inhibition of GSK-3β activity, suggesting that OTG acts upstream of GSK-3β. OTG bound specifically to Frizzled8 (Fz8) receptor and caused retention of Fz8 in the endoplasmic reticulum possibly by preventing N-linked glycosylation of Fz8. Taken together, our data indicate that OTG functions as a novel negative regulator of Wnt signaling during development by the modulation of cell surface expression of Fz receptor.