Cell identity and tissue morphogenesis are tightly orchestrated during organogenesis, but the mechanisms regulating this are poorly understood. We show that interactions between Wnt11 and the secreted Wnt antagonist secreted frizzled-related protein 5 (Sfrp5) coordinate cell fate and morphogenesis during Xenopus foregut development. sfrp5 is expressed in the surface cells of the foregut epithelium, whereas wnt11 is expressed in the underlying deep endoderm. Depletion of Sfrp5 results in reduced foregut gene expression and hypoplastic liver and ventral pancreatic buds. In addition, the ventral foregut cells lose adhesion and fail to form a polarized epithelium. We show that the cell fate and epithelial defects are due to inappropriate Wnt/beta-catenin and Wnt/PCP signaling, respectively, both mediated by Wnt11. We provide evidence that Sfrp5 locally inhibits Wnt11 to maintain early foregut identity and to allow an epithelium to form over a mass of tissue undergoing Wnt-mediated cell movements. This novel mechanism coordinating canonical and noncanonical Wnt signaling may have broad implications for organogenesis and cancer.