Vps54 is a subunit of the Golgi-associated retrograde protein (GARP) complex, which is involved in tethering endosome-derived vesicles to the trans-Golgi network (TGN). In the wobbler mouse, a model for human motor neuron (MN) disease, reduction in the levels of Vps54 causes neurodegeneration. However, it is unclear how disruption of the GARP complex leads to MN dysfunction. To better understand the role of Vps54 in MNs, we have disrupted expression of the Vps54 ortholog in Drosophila and examined the impact on the larval neuromuscular junction (NMJ). Surprisingly, we show that both null mutants and MN-specific knockdown of Vps54 leads to NMJ overgrowth. Reduction of Vps54 partially disrupts localization of the t-SNARE, Syntaxin-16, to the TGN but has no visible impact on endosomal pools. MN-specific knockdown of Vps54 in MNs combined with overexpression of the small GTPases Rab5, Rab7, or Rab11 suppresses the Vps54 NMJ phenotype. Conversely, knockdown of Vps54 combined with overexpression of dominant negative Rab7 causes NMJ and behavioral abnormalities including a decrease in postsynaptic Dlg and GluRIIB levels without any effect on GluRIIA. Taken together, these data suggest that Vps54 controls larval MN axon development and postsynaptic density composition through a mechanism that requires Rab7.