Netrin is a secreted protein that can act as a chemotropic axon guidance cue. Two classes of Netrin receptor, DCC and UNC-5 (refs 6-9), are required for axon guidance and are thought to mediate Netrin signals in growth cones through their cytoplasmic domains. However, in the guidance of Drosophila photoreceptor axons, the DCC orthologue Frazzled is required not in the photoreceptor neurons but instead in their targets, indicating that Frazzled also has a non-cell-autonomous function. Here we show that Frazzled can capture Netrin and 'present' it for recognition by other receptors. Moreover, Frazzled itself is actively localized within the axon through its cytoplasmic domain, and thereby rearranges Netrin protein into a spatial pattern completely different from the pattern of Netrin gene expression. Frazzled-dependent guidance of one pioneer neuron in the central nervous system can be accounted for solely on the basis of this ability of Frazzled to control Netrin distribution, and not by Frazzled signalling. We propose a model of patterning mechanism in which a receptor rearranges secreted ligand molecules, thereby creating positional information for other receptors.