The Wnt/β-catenin pathway plays a central role in epidermal homeostasis and regeneration, but how it affects fibroblast fate decisions is unknown. We investigated the effect of targeted β-catenin stabilization in dermal fibroblasts. Comparative gene expression profiling of stem cell antigen 1^- (Sca1^-) and Sca1⁺ neonatal fibroblasts from upper and lower dermis, respectively, confirmed that Sca1⁺ cells had a preadipocyte signature and showed differential expression of Wnt/β-catenin–associated genes. By targeting all fibroblasts or selectively targeting Dlk1⁺ lower dermal fibroblasts, we found that β-catenin stabilization between developmental stages E16.5 and P2 resulted in a reduction in the dermal adipocyte layer with a corresponding increase in dermal fibrosis and an altered hair cycle. The fibrotic phenotype correlated with a reduction in the potential of Sca1⁺ fibroblasts to undergo adipogenic differentiation ex vivo. Our findings indicate that Wnt/β-catenin signaling controls adipogenic cell fate within the lower dermis, which potentially contributes to the pathogenesis of fibrotic skin diseases.