The analysis of membrane trafficking has in the past mainly dealt with single cells in culture. Recent studies of membrane trafficking in Drosophila focus on how cells are organized in tissues and form epithelia during embryogenesis. During these processes, the specific involvement of distinct biosynthetic and endocytic routes is starting to be understood. Once organized in epithelia, cells communicate with each other to make cell fate decisions through morphogen gradients and lateral inhibition. Endocytosis seems to play unexpected roles in shaping morphogen gradients and in biasing lateral inhibition events. Once committed to a developmental program, cells differentiate. In the case of neurons, trafficking through the biosynthetic and endocytic pathways may give the necessary speed of response and versatility to axons that navigate through a changing environment during pathfinding.