In Drosophila, the Jun-N-terminal Kinase-(JNK) signaling pathway is required for epithelial cell shape changes during dorsal closure of the embryo. In the absence of JNK pathway activity, as in the DJNKK/hemipterous (hep) mutant, the dorsolateral ectodermal cells fail both to elongate and move toward the dorsal midline, leading to dorsally open embryos. We show here that hep and the JNK pathway are required later in development, for correct morphogenesis of other epithelia, the imaginal discs. During metamorphosis, the imaginal discs undergo profound morphological changes, giving rise to the adult head and thoracic structures, including the cuticle and appendages. hep mutant pupae and pharate adults show severe defects in discs morphogenesis, especially in the fusion of the two lateral wing discs. We show that these defects are accompanied by a loss of expression of puckered (puc), a JNK phosphatase-encoding gene, in a subset of peripodial cells that ultimately delineates the margins of fusing discs. In further support of a role of puc in discs morphogenesis, pupal and adult hep phenotypes are suppressed by reducing puc function, indicative of a negative role of puc in disc morphogenesis. Furthermore, we show that the small GTPase Dcdc42, but not Drac1, is an activator of puc expression in a hep-dependent manner in imaginal discs. Altogether, these results demonstrate a new role for the JNK pathway in epithelial morphogenesis, and provide genetic evidence for a role of the peripodial membrane in disc morphogenesis. We discuss a general model whereby the JNK pathway regulates morphogenesis of epithelia with differentiated edges.