The insulin/PI3K signaling pathway controls both tissue growth and metabolism. Here, we identify Melted as a new modulator of this pathway in Drosophila. Melted interacts with both Tsc1 and FOXO and can recruit these proteins to the cell membrane. We provide evidence that in the melted mutant, TOR activity is reduced and FOXO is activated. The melted mutant condition mimics the effects of nutrient deprivation in a normal animal, producing an animal with 40% less fat than normal.