Wnt signaling provides a paradigm for cell-cell signals that regulate embryonic development and stem cell homeostasis and are inappropriately activated in cancers. The tumor suppressors APC and Axin form the core of the multiprotein destruction complex, which targets the Wnt-effector beta-catenin for phosphorylation, ubiquitination and destruction. Based on earlier work, we hypothesize that the destruction complex is a supramolecular entity that self-assembles by Axin and APC polymerization, and that regulating assembly and stability of the destruction complex underlie its function. We tested this hypothesis in Drosophila embryos, a premier model of Wnt signaling. Combining biochemistry, genetic tools to manipulate Axin and APC2 levels, advanced imaging and molecule counting, we defined destruction complex assembly, stoichiometry, and localization in vivo, and its downregulation in response to Wnt signaling. Our findings challenge and revise current models of destruction complex function. Endogenous Axin and APC2 proteins and their antagonist Dishevelled accumulate at roughly similar levels, suggesting competition for binding may be critical. By expressing Axin:GFP at near endogenous levels we found that in the absence of Wnt signals, Axin and APC2 co-assemble into large cytoplasmic complexes containing tens to hundreds of Axin proteins. Wnt signals trigger recruitment of these to the membrane, while cytoplasmic Axin levels increase, suggesting altered assembly/disassembly. Glycogen synthase kinase3 regulates destruction complex recruitment to the membrane and release of Armadillo/beta-catenin from the destruction complex. Manipulating Axin or APC2 levels had no effect on destruction complex activity when Wnt signals were absent, but, surprisingly, had opposite effects on the destruction complex when Wnt signals were present. Elevating Axin made the complex more resistant to inactivation, while elevating APC2 levels enhanced inactivation. Our data suggest both absolute levels and the ratio of these two core components affect destruction complex function, supporting models in which competition among Axin partners determines destruction complex activity.