<i>Giardia lamblia</i> causes waterborne diarrhoea by transmission of infective cysts. Three cyst wall proteins are highly expressed in a concerted manner during encystation of trophozoites into cysts. However, their gene regulatory mechanism is still largely unknown. DNA topoisomerases control topological homeostasis of genomic DNA during replication, transcription and chromosome segregation. They are involved in a variety of cellular processes including cell cycle, cell proliferation and differentiation, so they may be valuable drug targets. <i>Giardia lamblia</i> possesses a type IA DNA topoisomerase (TOP3β) with similarity to the mammalian topoisomerase IIIβ. We found that TOP3β was upregulated during encystation and it possessed DNA-binding and cleavage activity. TOP3β can bind to the <i>cwp</i> promoters <i>in vivo</i> using norfloxacin-mediated topoisomerase immunoprecipitation assays. We also found TOP3β can interact with MYB2, a transcription factor involved in the coordinate expression of <i>cwp1-3</i> genes during encystation. Interestingly, overexpression of TOP3β increased expression of <i>cwp1</i>-<i>3</i> and <i>myb2</i> genes and cyst formation. Microarray analysis confirmed upregulation of <i>cwp1-3</i> and <i>myb2</i> genes by TOP3β. Mutation of the catalytically important Tyr residue, deletion of C-terminal zinc ribbon domain or further deletion of partial catalytic core domain reduced the levels of cleavage activity, <i>cwp1-3</i> and <i>myb2</i> gene expression, and cyst formation. Interestingly, some of these mutant proteins were mis-localized to cytoplasm. Using a CRISPR/Cas9 system for targeted disruption of <i>top3</i>β gene, we found a significant decrease in <i>cwp1-3</i> and <i>myb2</i> gene expression and cyst number. Our results suggest that TOP3β may be functionally conserved, and involved in inducing <i>Giardia</i> cyst formation.