A shared feature of many neural circuits is their organization into synaptic layers. However, the mechanisms that direct neurites to distinct layers remain poorly understood. We identified a central role for Netrins and their receptor Frazzled in mediating layer-specific axon targeting in the Drosophila visual system. Frazzled is expressed and cell autonomously required in R8 photoreceptors for directing their axons to the medulla-neuropil layer M3. Netrin-B is specifically localized in this layer owing to axonal release by lamina neurons L3 and capture by target neuron-associated Frazzled. Ligand expression in L3 is sufficient to rescue R8 axon-targeting defects of Netrin mutants. R8 axons target normally despite replacement of diffusible Netrin-B by membrane-tethered ligands. Finally, Netrin localization is instructive because expression in ectopic layers can retarget R8 axons. We propose that provision of localized chemoattractants by intermediate target neurons represents a highly precise strategy to direct axons to a positionally defined layer.