The development of tubular organs often involves the hollowing of cells into a torus (doughnut shape), as observed in blood vessel formation in vertebrates and tracheal development in insects. During the fusion of Drosophila tracheal branches, fusion cells located at the tip of migrating branches contact each other and form intracellular luminal cavities on opposite sides of the cells that open to connect the tubule lumens. This process involves the intracellular fusion of plasma membranes associated with microtubule tracks. Here, we studied the function of an evolutionarily conserved small GTPase, Arf-like 3, in branch fusion. Arf-like 3 is N-terminally acetylated, and associates with both intracellular vesicles and microtubules. In Arf-like 3 mutants, the cell adhesion of fusion cells, specification of apical membrane domains, and secretion of luminal extracellular matrix proceeded normally, but the luminal cavities did not open due to the failure of intracellular fusion of the plasma membranes. We present evidence that the Arf-like 3 mutation impairs the localized assembly of the exocyst complex, suggesting that the targeting of exocytosis machinery to specific apical domains is the key step in converting the plasma membrane topology in fusion cells.