ss-Catenin (Ctnnb1) has been shown to play critical roles in the development and maintenance of epithelial cells, including the retinal pigment epithelium (RPE). Ctnnb1 is not only a component of intercellular junctions in the epithelium, it also functions as a transcriptional regulator in the Wnt signaling pathway. To identify which of its functional modalities is critically involved in mouse RPE development and maintenance, we varied Ctnnb1 gene content and activity in mouse RPE lineage cells and tested their impacts on mouse eye development. We found that a Ctnnb1 double mutant (Ctnnb1(dm)), which exhibits impaired transcriptional activity, could not replace Ctnnb1 in the RPE, whereas Ctnnb1(Y654E), which has reduced affinity for the junctions, could do so. Expression of the constitutively active Ctnnb1(Delta ex3) mutant also suppressed the development of RPE, instead facilitating a ciliary cell fate. However, the post-mitotic or mature RPE was insensitive to the loss, inactivation, or constitutive activation of Ctnnb1. Collectively, our results suggest that Ctnnb1 should be maintained within an optimal range to specify RPE through transcriptional regulation of Wnt target genes in the optic neuroepithelium.