A cell is constantly subjected to cues from its surroundings in the form of signalling molecules e.g. Wingless (Wg), Insulin-like growth factor (IGF). As a result, important decisions regarding processes like growth, division, differentiation or migration are made. The work presented here attempts to characterise a cell-surface molecule in Drosophila that helps in the reception of some of these signals by acting as a low-affinity co-receptor. Cloning and sequencing of a fragment from the Drosophila cDNA library revealed it to be a glypican, a heparan sulfate proteoglycan (HSPG) attached to the cell surface by a glycosylphosphatidylinositol (GPI) anchor. The segmentally repeated expression pattern of dly in embryos and the phenotypes caused by the dsRNAi experiments suggested that it may have a role in Wg signalling. Ectopic expression of dly showed that it may function by accumulating Wg molecules near Frizzled/Dfrizzled2, the high affinity receptors. dly mutants have small body size, eyes and wings, but larger ommatidia and wing hairs as compared to the wild type flies. The large, disorganised ommatidia are reminiscent of those in mutant dpten, a negative regulator or IGF signalling. Our studies showed that dly and dpten are genetic enhancers of each other, suggesting that Dly too may be a suppressor of IGF signalling. However, the interactions seem to be more complicated in the central nervous system (CNS), where Dly and IGF are expressed. Mutations in both genes showed loss of CNS organisation. Surprisingly, the double mutants showed an enhancement of these defects. This led us to propose that Dly may modulate signalling by the same molecule in a tissue-specific manner.