Basigin, an IgG family glycoprotein found on the surface of human metastatic tumors, stimulates fibroblasts to secrete matrix metalloproteases (MMPs) that remodel the extracellular matrix, and is thus also known as Extracellular Matrix MetalloPRotease Inducer (EMMPRIN). Using Drosophila we previously identified novel roles for basigin. Specifically, photoreceptors of flies with basigin eyes show misplaced nuclei, rough ER and mitochondria, and swollen axon terminals, suggesting cytoskeletal disruptions. Here we demonstrate that basigin is required for normal neuron-glia interactions in the Drosophila visual system. Flies with basigin mutant photoreceptors have misplaced epithelial glial cells within the first optic neuropile, or lamina. In addition, epithelial glia insert finger-like projections--capitate projections (CPs)--sites of vesicle endocytosis and possibly neurotransmitter recycling. When basigin is missing from photoreceptors terminals, CP formation between glia and photoreceptor terminals is disrupted. Visual system function is also altered in flies with basigin mutant eyes. While photoreceptors depolarize normally to light, synaptic transmission is greatly diminished, consistent with a defect in neurotransmitter release. Basigin expression in photoreceptor neurons is required for normal structure and placement of glia cells.