The Daam family of proteins consists of Daam1 and Daam2. Although Daam1 participates in noncanonical Wnt signaling during gastrulation, Daam2 function remains completely uncharacterized. Here we describe the role of Daam2 in canonical Wnt signal transduction during spinal cord development. Loss-of-function studies revealed that Daam2 is required for dorsal progenitor identities and canonical Wnt signaling. These phenotypes are rescued by β-catenin, demonstrating that Daam2 functions in dorsal patterning through the canonical Wnt pathway. Complementary gain-of-function studies demonstrate that Daam2 amplifies Wnt signaling by potentiating ligand activation. Biochemical examination found that Daam2 association with Dvl3 is required for Wnt activity and dorsal patterning. Moreover, Daam2 stabilizes Dvl3/Axin2 binding, resulting in enhanced intracellular assembly of Dvl3/Axin2 complexes. These studies demonstrate that Daam2 modulates the formation of Wnt receptor complexes, revealing new insight into the functional diversity of Daam proteins and how canonical Wnt signaling contributes to pattern formation in the developing spinal cord.