Most melanocytes in the skin arise from neural crest cells that migrate dorso-laterally and form melanoblasts (melanocyte precursors) during early embryogenesis. However, a second wave of melanoblasts is known to arise from Schwann cell precursors (SCPs) slightly later in development. These SCPs give rise to melanocytes in the skin of the trunk and limbs, but the factors that control their differentiation are unclear. Now, Lionel Larue and colleagues report that stabilization of β-catenin promotes melanocyte specification at the expense of Schwann cell fate in mice. They first reveal that constitutively active β-catenin induces hyperpigmentation of the paws but has no effect on coat colour or trunk melanoblast proliferation. They further show that this paw hyperpigmentation is due to elevated numbers of melanocytes. Using temporal induction, the researchers report that melanocytes in the paws, where hyperpigmentation is observed, originate from second wave melanoblasts. Moreover, β-catenin activation in bipotent progenitors promotes their differentiation into melanoblasts at the expense of Schwann cells. Based on knockdown and ChIP-seq analyses in cell lines, the authors propose a model whereby enhanced β-catenin signalling in SCPs promotes melanoblast fate through increased expression of MITF (a master regulator of melanocyte fate) and repression of FOXD3 (which promotes Schwann cell fate).