Acyl-CoA synthetase long-chain family member 4 (ACSL4) converts long-chain fatty acids to acyl-CoAs that are indispensable for lipid metabolism and cell signaling. Mutations in ACSL4 cause nonsyndromic X-linked mental retardation. We previously demonstrated that Drosophila dAcsl is functionally homologous to human ACSL4, and is required for axonal targeting in the brain. Here, we report that Drosophila dAcsl mutants exhibited distally biased axonal aggregates that were immunopositive for the synaptic-vesicle proteins synaptotagmin (Syt) and cysteine-string protein, the late endosome/lysosome marker lysosome-associated membrane protein 1, the autophagosomal marker Atg8, and the multivesicular body marker Hrs (hepatocyte growth factor-regulated tyrosine kinase substrate). In contrast, the axonal distribution of mitochondria and the cell adhesion molecule Fas II (fasciclin II) was normal. Electron microscopy revealed accumulation of prelysomes and multivesicle bodies. These aggregates appear as retrograde instead of anterograde cargos. Live imaging analysis revealed that dAcsl mutations increased the velocity of anterograde transport but reduced the flux, velocity, and processivity of retrograde transport of Syt-enhanced green fluorescent protein-labeled vesicles. Immunohistochemical and electrophysiological analyses showed significantly reduced growth and stability of neuromuscular synapses, and impaired glutamatergic neurotransmission in dAcsl mutants. The axonal aggregates and synaptic defects in dAcsl mutants were fully rescued by neuronal expression of human ACSL4, supporting a functional conservation of ACSL4 across species in the nervous system. Together, our findings demonstrate that dAcsl regulates axonal transport of synaptic vesicles and is required for synaptic development and function. Defects in axonal transport and synaptic function may account, at least in part, for the pathogenesis of ACSL4-related mental retardation.