Fes/Fer non-receptor tyrosine kinases regulate cell adhesion and cytoskeletal reorganisation through the modification of adherens junctions. Unregulated Fes/Fer kinase activity has been shown to lead to tumours in vivo. Here, we show that Drosophila Fer localises to adherens junctions in the dorsal epidermis and regulates a major morphological event, dorsal closure. Mutations in Src42A cause defects in dorsal closure similar to those seen in dfer mutant embryos. Furthermore, Src42A mutations enhance the dfer mutant phenotype, suggesting that Src42A and DFer act in the same cellular process. We show that DFer is required for the formation of the actin cable in leading edge cells and for normal rates of dorsal closure. We have isolated a gain-of-function mutation in dfer (dfergof) that expresses an N-terminally fused form of the protein, similar to oncogenic forms of vertebrate Fer. dfergof blocks dorsal closure and causes axon misrouting. We find that in dfer loss-of-function mutants beta-catenin is hypophosphorylated, whereas in dfergof beta-catenin is hyperphosphorylated. Phosphorylated beta-catenin is removed from adherens junctions and degraded, thus implicating DFer in the regulation of adherens junctions.