Retrieval of synaptic vesicles from the membrane of neurons is crucial to maintain normal rates of neurotransmitter release. Photoreceptor terminals of the fly's eye release neurotransmitter in a tonic manner. They therefore rely heavily on vesicle regeneration. Null mutations in endophilin (endo) block clathrin-mediated endocytosis at the Drosophila neuromuscular junction, where previous analysis of hypomorphic mutations has suggested a function for Endophilin (Endo) before vesicle fission, during membrane bending. Here, at fly photoreceptor synapses, we show that Endo is localized to synaptic vesicles at sites of endocytosis that are glial invaginations called capitate projections, and that when the photoreceptor synapses lack Endo they are impaired in their ability to release neurotransmitter. Detailed ultrastructural analysis of endo null mutant photoreceptor synapses fails to reveal a defect at early stages of vesicle reformation but, instead, reveals an accumulation of clusters of electron-dense, apparently nonfunctional, late endocytotic vesicles. Using dynamin;endo double-mutant photoreceptors, we provide further evidence that ultimately the function of Endophilin is required late in endocytosis, allowing vesicles to progress through the synaptic vesicle cycle.