The protein 4.1 superfamily is comprised of a diverse group of cytoplasmic proteins, many of which have been shown to associate with the plasma membrane via binding to specific transmembrane proteins. Coracle, a Drosophila protein 4.1 homologue, is required during embryogenesis and is localized to the cytoplasmic face of the septate junction in epithelial cells. Using in vitro mutagenesis, we demonstrate that the amino-terminal 383 amino acids of Coracle define a functional domain that is both necessary and sufficient for proper septate junction localization in transgenic embryos. Genetic mutations within this domain disrupt the subcellular localization of Coracle and severely affect its genetic function, indicating that correct subcellular localization is essential for Coracle function. Furthermore, the localization of Coracle and the transmembrane protein Neurexin to the septate junction display an interdependent relationship, suggesting that Coracle and Neurexin interact with one another at the cytoplasmic face of the septate junction. Consistent with this notion, immunoprecipitation and in vitro binding studies demonstrate that the amino-terminal 383 amino acids of Coracle and cytoplasmic domain of Neurexin interact directly. Together these results indicate that Coracle provides essential membrane-organizing functions at the septate junction, and that these functions are carried out by an amino-terminal domain that is conserved in all protein 4.1 superfamily members.