Heparan sulfate proteoglycan plays an important role in developmental processes by modulating the distribution and stability of the morphogens Wingless, Hedgehog, and Decapentaplegic. Heparan and chondroitin sulfates share a common linkage tetrasaccharide structure, GlcAbeta1,3Galbeta1,3Galbeta1,4Xylbeta-O-Ser. In the present study, we identified Drosophila proteoglycan galactosyltransferase II (dbeta3GalTII), determined its substrate specificity, and performed its functional analysis by using RNA interference (RNAi) mutant flies. The enzyme transferred a galactose to Galbeta1,4Xyl-pMph, confirming that it is the Drosophila ortholog of human proteoglycan galactosyltransferase II. Real-time PCR analyses revealed that dbeta3GalTII is expressed in various tissues and throughout development. The dbeta3GalTII RNAi mutant flies showed decreased amounts of heparan sulfate proteoglycans. A genetic interaction of dbeta3GalTII with Drosophila beta1,4-galactoslyltransferase 7 (dbeta4GalT7) or with six genes that encode enzymes contributing to the synthesis of glycosaminoglycans indicated that dbeta3GalTII is involved in heparan sulfate synthesis for wing and eye development. Moreover, dbeta3GalTII knock-down caused a decrease in extracellular Wingless in the wing imaginal disc of the third instar larvae. These results demonstrated that dbeta3GalTII contributes to heparan sulfate proteoglycan synthesis in vitro and in vivo and also modulates Wingless distribution.