Cell adhesion molecules (CAMs) have been universally recognized for their essential roles during synapse remodeling. However, the downstream pathways activated by CAMs have remained mostly unknown. Here, we used the Drosophila larval neuromuscular junction to investigate the pathways activated by Fasciclin II (FasII), a transmembrane CAM of the Ig superfamily, during synapse remodeling. We show that the ability of FasII to stimulate or to prevent synapse formation depends on the symmetry of transmembrane FasII levels in the presynaptic and postsynaptic cell and requires the presence of the fly homolog of amyloid precursor protein (APPL). In turn, APPL is regulated by direct interactions with the PDZ (postsynaptic density-95/Discs large/zona occludens-1)-containing protein dX11/Mint/Lin-10, which also regulates synapse expansion downstream of FasII. These results provide a novel mechanism by which cell adhesion molecules are regulated and provide fresh insights into the normal operation of APP during synapse development.