Prion-like proteins can assume distinct conformational and physical states in the same cell. Sequence analysis suggests that prion-like proteins are prevalent in various species; however, it remains unclear what functional space they occupy in multicellular organisms. Here, we report the identification of a prion-like protein, Herzog (CG5830), through a multimodal screen in Drosophila melanogaster. Herzog functions as a membrane-associated phosphatase and controls embryonic patterning, likely being involved in TGF-β/BMP and FGF/EGF signaling pathways. Remarkably, monomeric Herzog is enzymatically inactive and becomes active upon amyloid-like assembly. The prion-like domain of Herzog is necessary for both its assembly and membrane targeting. Removal of the prion-like domain impairs activity, while restoring assembly on the membrane using a heterologous prion-like domain and membrane-targeting motif can restore phosphatase activity. This study provides an example of a prion-like domain that allows an enzyme to gain essential functionality via amyloid-like assembly to control animal development.