Ryk pseudokinase receptors act as important transducers of Wnt signals, particularly in the nervous system. Little is known, however, of their interactions at the cell surface. Here, we show that a Drosophila Ryk family member, DERAILED (DRL), forms cell surface homodimers and can also heterodimerize with the two other fly Ryks, DERAILED-2 and DOUGHNUT ON 2. DERAILED homodimerization levels increase significantly in the presence of its ligand, WNT5. In addition, DERAILED displays ligand-independent dimerization mediated by a motif in its transmembrane domain. Increased dimerization of DRL upon WNT5 binding or upon the replacement of DERAILED's extracellular domain with the immunoglobulin Fc domain results in an increased recruitment of the Src family kinase SRC64B, a previously identified downstream pathway effector. Formation of the SRC64B/DERAILED complex requires SRC64B's SH2 domain and DERAILED's PDZ-binding motif. Mutations in DERAILED's inactive tyrosine kinase-homologous domain also disrupt the formation of DERAILED/SRC64B complexes, indicating that its conformation is likely important in facilitating its interaction with SRC64B. Finally, we show that DERAILED's function during embryonic axon guidance requires its Wnt-binding domain, a putative juxtamembrane extracellular tetrabasic cleavage site, and the PDZ-binding domain, indicating that DERAILED's activation involves a complex set of events including both dimerization and proteolytic processing.