Dap160/Intersectin interacts with several synaptic proteins and affects endocytosis and synapse development. The functional role of the different protein interaction domains is not well understood. Here we show that Dap160 lacking the dynamin-binding SH3 domains does not affect the development of the neuromuscular junction but plays a key role in synaptic vesicle recycling. dap160 mutants lacking dynamin-interacting domains no longer accumulate dynamin properly at the periactive zone, and it becomes dispersed in the bouton during stimulation. This is accompanied by a reduction in FM1–43 uptake, and an accumulation of large vesicles and membrane invaginations. However, we do not observe an increase in the number of clathrin-coated intermediates. We also note a depression in evoked EJPs during high-rate stimulation, accompanied by aberrantly large minis. The data reveal the important role of Dap160 in the targeting of dynamin to the periactive zone, where it is required to suppress bulk synaptic vesicle membrane retrieval during high frequency activity.