The core protein of glypican Dally-like determines its biphasic activity in wingless morphogen signaling

Dally-like (Dlp) is a glypican-type heparan sulfate proteoglycan (HSPG), containing a protein core and attached glycosaminoglycan (GAG) chains. In Drosophila wing discs, Dlp represses short-range Wingless (Wg) signaling, but activates long-range Wg signaling. Here, we show that Dlp core protein has similar biphasic activity as wild-type Dlp. Dlp core protein can interact with Wg; the GAG chains enhance this interaction. Importantly, we find that Dlp exhibits a biphasic response, regardless of whether its glycosylphosphatidylinositol linkage to the membrane can be cleaved. Rather, the transition from signaling activator to repressor is determined by the relative expression levels of Dlp and the Wg receptor, Frizzled (Fz) 2. Based on these data, we propose that the principal function of Dlp is to retain Wg on the cell surface. As such, it can either compete with the receptor or provide ligands to the receptor, depending on the ratios of Wg, Fz2, and Dlp.