Iron is an essential element in many biological processes. In vertebrates, serum transferrin is the major supplier of iron to tissues, but the function of additional transferrin-like proteins remains poorly understood. Melanotransferrin (MTf) is a phylogenetically conserved, iron-binding epithelial protein. Elevated MTf levels have been implicated in melanoma pathogenesis. Here, we present a functional analysis of MTf in Drosophila melanogaster. Similarly to its human homologue, Drosophila MTf is a lipid-modified, iron-binding protein attached to epithelial cell membranes, and is a component of the septate junctions that form the paracellular permeability barrier in epithelial tissues. We demonstrate that septate junction assembly during epithelial maturation relies on endocytosis and apicolateral recycling of iron-bound MTf. Mouse MTf complements the defects of Drosophila MTf mutants. Drosophila provides the first genetic model for the functional dissection of MTf in epithelial junction assembly and morphogenesis.