Fibroblast growth factor receptor 3 (FGFR-3) is expressed in the lower crypt epithelium, where stem cells of the intestine reside. The role of FGFR-3 signaling in regulating features of intestinal morphogenesis was examined in FGFR-3-null (FGFR-3(-/-)) mice. FGFR-3(-/-) mice had only about half the number of intestinal crypts and a marked decrease in the number of functional clonogenic stem cells, as assessed by an in vivo microcolony-forming assay, compared with wild-type littermates. A marked deficit in allocation of progenitor cells to Paneth cell differentiation was noted, although all the principal epithelial lineages were represented in FGFR-3(-/-) mice. The total cellular content and nuclear localization of beta-catenin protein were reduced in FGFR-3(-/-) mice, as was expression of cyclin D1 and matrix metalloproteinase-7, major downstream targets of beta-catenin/T cell factor-4 (Tcf-4) signaling. Activation of FGFR-3 in Caco-2 cells, an intestinal epithelial cell line, abrogated the fall in beta-catenin/Tcf-4 signaling activity that is normally observed in these cells as cultures become progressively more confluent. These findings are consistent with the hypothesis that, during intestinal development, FGFR-3 signaling regulates crypt epithelial stem cell expansion and crypt morphogenesis, as well as Paneth cell lineage specification, through beta-catenin/Tcf-4-dependent and -independent pathways.