Robust animal development, tissue homeostasis, and stem cell renewal requires precise control of the Wnt/beta-catenin signaling axis. In the embryo of the fruit fly Drosophila melanogaster, the naked cuticle (nkd) gene attenuates signaling by the Wnt ligand Wingless (Wg) during segmentation. nkd mutants have been reported to exhibit abnormalities in wg transcription, Wg protein distribution and/or transport, and the intracellular response to Wg, but the relationship between each alteration and the molecular mechanism of Nkd action remains unclear. In addition, whether Nkd acts in a cell-autonomous or nonautonomous fashion in the embryo is not known. Mammalian Nkd homologs have N-terminal consensus sequences that direct the post-translational addition of a lipophilic myristoyl moiety, but fly and mosquito Nkd, while sharing N-terminal sequence homology, lack a myristoylation consensus sequence. Here we provide evidence that fly Nkd acts cell-autonomously in the embryo, with its N-terminus able to confer unique functional properties and membrane association that cannot be mimicked in vivo by heterologous myristoylation consensus sequences. In conjunction with our recent observation that Nkd requires nuclear localization for function, our data suggest that Nkd acts at more than one subcellular location within signal-receiving cells to attenuate Wg signaling.