Resent studies have identified Pygopus as a core component of the β-catenin/T-cell factor (TCF)/lymphoid-enhancing factor 1 (LEF) transcriptional activation complex required for the expression of canonical Wg/Wnt target genes in Drosophila. However, the biochemical involvement of mammalian Pygopus proteins in β-catenin/TCF/LEF gene activation remains controversial. In this study, we perform a series of molecular/biochemical experiments to demonstrate that Pygo2 associates with histone-modifying enzymatic complexes, specifically the MLL2 histone methyltransferase (HMT) and STAGA histone acetyltransferase (HAT) complexes, to facilitate their interaction with β-catenin and to augment Wnt1-induced, TCF/LEF-dependent transcriptional activation in breast cancer cells. We identify a critical domain in Pygo2 encompassing the first 47 amino acids that mediates its HMT/HAT interaction. We further demonstrate the importance of this domain in Pygo2's ability to transcriptionally activate both artificial and endogenous Wnt target genes and to expand breast cancer stem-like cells in culture. This work now links mechanistically Pygo2's role in histone modification to its enhancement of the Wnt-dependent transcriptional program and cancer stem-like cell expansion.