miR-124 is conserved in sequence and neuronal expression across the animal kingdom and is predicted to have hundreds of mRNA targets. Diverse defects in neural development and function were reported from miR-124 antisense studies in vertebrates, but a nematode knockout of mir-124 surprisingly lacked detectable phenotypes. To provide genetic insight from Drosophila, we deleted its single mir-124 locus and found that it is dispensable for gross aspects of neural specification and differentiation. On the other hand, we detected a variety of mutant phenotypes that were rescuable by a mir-124 genomic transgene, including short lifespan, increased dendrite variation, impaired larval locomotion, and aberrant synaptic release at the NMJ. These phenotypes reflect extensive requirements of miR-124 even under optimal culture conditions. Comparison of the transcriptomes of cells from wild-type and mir-124 mutant animals, purified on the basis of mir-124 promoter activity, revealed broad upregulation of direct miR-124 targets. However, in contrast to the proposed mutual exclusion model for miR-124 function, its functional targets were relatively highly expressed in miR-124-expressing cells and were not enriched in genes annotated with epidermal expression. A notable aspect of the direct miR-124 network was coordinate targeting of five positive components in the retrograde BMP signaling pathway, whose activation in neurons increases synaptic release at the NMJ, similar to mir-124 mutants. Derepression of the direct miR-124 target network also had many secondary effects, including over-activity of other post-transcriptional repressors and a net incomplete transition from a neuroblast to a neuronal gene expression signature. Altogether, these studies demonstrate complex consequences of miR-124 loss on neural gene expression and neurophysiology.