Through intercalation, a fundamental mechanism underlying elongation during morphogenesis, epithelial cells exchange places in a spatially oriented manner. Epithelial cells are tightly coupled through distinct intercellular junctions, including adherens junctions. Whether trafficking-mediated regulation of adhesion through adherens junctions modulates intercalation in vivo remains controversial. In Drosophila melanogaster, cells in most branches intercalate during tracheal development. However, Wingless (Wg)-promoted expression of the transcription factor Spalt (Sal) in the dorsal trunk inhibits intercalation by an unknown mechanism. Here we have examined the role of trafficking in tracheal intercalation and show that it requires endocytosis, whereas it is opposed by Rab11-mediated recycling in the dorsal trunk. Subapical Rab11 accumulation is enhanced by sal and elevated Rab11-mediated recycling occurs in the dorsal trunk, suggesting that upregulation of Rab11 is one way in which sal inhibits intercalation. We found that dRip11, which regulates Rab11 localization and function, is regulated by sal and can modulate intercalation. Finally, we provide evidence that levels of E-cadherin (DE-cad), an adherens junction component and Rab11-compartment cargo, are dynamically regulated by trafficking during tracheal development, and that such regulation modulates intercalation. Our work suggests a mechanism by which trafficking of adhesion molecules regulates intercalation, and shows how this mechanism can be modulated in vivo to influence cell behaviour.