Drosophila Wingless (Wg) is a morphogen that determines cell fate during development. Previous studies have shown that endocytic pathways regulate Wg trafficking and signaling. Here, we showed that loss of vamp7, a gene required for vesicle fusion, dramatically increased Wg levels and decreased Wg signaling. Interestingly, we found that levels of Dally-like (Dlp), a glypican that can interact with Wg to suppress Wg signaling at the dorsoventral boundary of the Drosophila wing, were also increased in vamp7 mutant cells. Moreover, Wg puncta in Rab4-dependent recycling endosomes were Dlp positive. We hypothesize that VAMP7 is required for Wg intracellular trafficking and the accumulation of Wg in Rab4-dependent recycling endosomes might affect Wg signaling.