Adhesion proteins not only control the degree to which cells adhere to each other but are increasingly recognised as regulators of intercellular signalling. Using genetic screening in Drosophila, we have identified Fasciclin 2 (Fas2), the Drosophila orthologue of neural cell adhesion molecule (NCAM), as a physiologically significant and specific inhibitor of epidermal growth factor receptor (EGFR) signalling in development. We find that loss of fas2 genetically interacts with multiple genetic conditions that perturb EGFR signalling. Fas2 is expressed in dynamic patterns during imaginal disc development, and in the eye we have shown that this depends on EGFR activity, implying participation in a negative-feedback loop. Loss of fas2 causes characteristic EGFR hyperactivity phenotypes in the eye, notum and wing, and also leads to downregulation of Yan, a transcriptional repressor targeted for degradation by EGFR activity. No significant genetic interactions were detected with the Notch, Wingless, Hedgehog or Dpp pathways, nor did Fas2 inhibit the FGF receptor or Torso, indicating specificity in the inhibitory role of Fas2 in EGFR signalling. Our results introduce a new regulatory interaction between an adhesion protein and a Drosophila signalling pathway and highlight the extent to which the EGFR pathway must be regulated at multiple levels.