Recently, it has become possible to directly detect changes in neuropeptide vesicle dynamics in nerve terminals in vivo and to measure the release of neuropeptides induced experimentally or evoked by normal behavior. These results were obtained with the use of transgenic fruit flies that express a neuropeptide tagged with green fluorescent protein. Here, we describe how vesicle movement and neuropeptide release can be studied in the larval Drosophila neuromuscular junction using fluorescence microscopy. Analysis methods are described for quantifying movement based on time lapse and fluorescence recovery after photobleaching data. Specific approaches that can be applied to nerve terminals include single particle tracking, correlation and Fourier analysis. Utilization of these methods led to the first detection of vesicle mobilization in nerve terminals and the discoveries of activity-dependent capture of transiting vesicles and post-tetanic potentiation of neuropeptide release. Overall, this protocol can be carried out in an hour with ready Drosophila.