The lysyl hydroxylase (LH) family of enzymes has important roles in the biosynthesis of collagen. In this paper we present the first description of Drosophila LH3 (dPlod), the only lysyl hydroxylase encoded in the fly genome. We have characterised in detail the developmental expression patterns of dPlod RNA and protein during embryogenesis. Consistent with its predicted function as a collagen-modifying enzyme, we find that dPlod is highly expressed in type-IV collagen-producing cells, particularly the haemocytes and fat body. Examination of dPlod subcellular localisation reveals that it is an endoplasmic reticulum resident protein, that partially overlaps with intracellular type-IV collagen. Furthermore, we show that dPlod is required for type-IV collagen secretion from haemocytes and fat body, and thus establish that LH3 enzyme function is conserved across widely separated animal phyla. Our findings, and the new tools we describe, establish the fly as an attractive model in which to study this important collagen biosynthesis enzyme.