A relatively small number of proteins have been suggested to act as morphogens-signalling molecules that spread within tissues to organize tissue repair and the specification of cell fate during development. Among them are Wnt proteins, which carry a palmitoleate moiety that is essential for signalling activity(1-3). How a hydrophobic lipoprotein can spread in the aqueous extracellular space is unknown. Several mechanisms, such as those involving lipoprotein particles, exosomes or a specific chaperone, have been proposed to overcome this so-called Wnt solubility problem(4-6). Here we provide evidence against these models and show that the Wnt lipid is shielded by the core domain of a subclass of glypicans defined by the Dally-like protein (Dlp). Structural analysis shows that, in the presence of palmitoleoylated peptides, these glypicans change conformation to create a hydrophobic space. Thus, glypicans of the Dlp family protect the lipid of Wnt proteins from the aqueous environment and serve as a reservoir from which Wnt proteins can be handed over to signalling receptors. Genetic studies inDrosophilacombined with structural analyses show that glypicans bind palmitoylate moieties in Wnt ligands, and thus shield Wnt ligands from their aqueous environments to enable them to signal to their distant receptors.