Trans-synaptic adhesion between Neurexins (Nrxs) and Neuroligins (Nlgs) is thought to be required for proper synapse organization and modulation, and mutations in several human Nlgs have shown association with autism spectrum disorders. Here we report the generation and phenotypic characterization of Drosophila neuroligin 2 (dnlg2) mutants. Loss of dnlg2 results in reduced bouton numbers, aberrant presynaptic and postsynaptic development at neuromuscular junctions (NMJs), and impaired synaptic transmission. In dnlg2 mutants, the evoked responses are decreased in amplitude, whereas the total active zone (AZ) numbers at the NMJ are comparable to wild type, suggesting a decrease in the release probability. Ultrastructurally, the presynaptic AZ number per bouton area and the postsynaptic density area are both increased in dnlg2 mutants, whereas the subsynaptic reticulum is reduced in volume. We show that both presynaptic and postsynaptic expression of Dnlg2 is required to restore synaptic growth and function in dnlg2 mutants. Postsynaptic expression of Dnlg2 in dnlg2 mutants and wild type leads to reduced bouton growth whereas presynaptic and postsynaptic overexpression in wild-type animals results in synaptic overgrowth. Since Nlgs have been shown to bind to Nrxs, we created double mutants. These mutants are viable and display phenotypes that closely resemble those of dnlg2 and dnrx single mutants. Our results provide compelling evidence that Dnlg2 functions both presynaptically and postsynaptically together with Neurexin to determine the proper number of boutons as well as the number of AZs and size of synaptic densities during the development of NMJs.