Tracheobronchial submucosal glands (SMGs) are derived from one or more multipotent glandular stem cells that coalesce to form a placode in surface airway epithelium (SAE). Wnt/β-catenin-dependent induction of lymphoid enhancer factor (Lef-1) gene expression during placode formation is an early event required for SMG morphogenesis. We discovered that Sox2 expression is repressed as Lef-1 is induced within airway SMG placodes. Deletion of Lef-1 did not activate Sox2 expression in SMG placodes, demonstrating that Lef-1 activation does not directly inhibit Sox2 expression. Repression of Sox2 protein in SMG placodes occurred posttranscriptionally, since the activity of its endogenous promoter remained unchanged in SMG placodes. Thus we hypothesized that Sox2 transcriptionally represses Lef-1 expression in the SAE and that suppression of Sox2 in SMG placodes activates Wnt/β-catenin-dependent induction of Lef-1 during SMG morphogenesis. Consistent with this hypothesis, transcriptional reporter assays, ChIP analyses, and DNA-protein binding studies revealed a functional Sox2 DNA binding site in the Lef-1 promoter that is required for suppressing β-catenin-dependent transcription. In polarized primary airway epithelium, Wnt induction enhanced Lef-1 expression while also inhibiting Sox2 expression. Conditional deletion of Sox2 also enhanced Lef-1 expression in polarized primary airway epithelium, but this induction was significantly augmented by Wnt stimulation. Our findings provide the first evidence that Sox2 acts as a repressor to directly modulate Wnt-responsive transcription of the Lef-1 gene promoter. These studies support a model whereby Wnt signals and Sox2 dynamically regulate the expression of Lef-1 in airway epithelia and potentially also during SMG development.