Wnt pathways play essential roles in cell proliferation, morphogenesis, and cell fate specification during embryonic development. According to the consensus view, the Wnt pathway prevents the degradation of the key signaling component β-catenin by the protein complex containing the negative regulators Axin and glycogen synthase kinase 3 (GSK3). Stabilized β-catenin associates with TCF proteins and enters the nucleus to promote target gene expression. This study examines the involvement of HIPK2 (homeodomain-interacting protein kinase 2) in the regulation of different TCF proteins in Xenopus embryos in vivo. We show that the TCF family members LEF1, TCF4, and TCF3 are phosphorylated in embryonic ectoderm after Wnt8 stimulation and HIPK2 overexpression. We also find that TCF3 phosphorylation is triggered by canonical Wnt ligands, LRP6, and dominant negative mutants for Axin and GSK3, indicating that this process shares the same upstream regulators with β-catenin stabilization. HIPK2-dependent phosphorylation caused the dissociation of LEF1, TCF4, and TCF3 from a target promoter in vivo. This result provides a mechanistic explanation for the context-dependent function of HIPK2 in Wnt signaling; HIPK2 up-regulates transcription by phosphorylating TCF3, a transcriptional repressor, but inhibits transcription by phosphorylating LEF1, a transcriptional activator. Finally, we show that upon HIPK2-mediated phosphorylation, TCF3 is replaced with positively acting TCF1 at a target promoter. These observations emphasize a critical role for Wnt/HIPK2-dependent TCF phosphorylation and suggest that TCF switching is an important mechanism of Wnt target gene activation in vertebrate embryos.