Inter-organelle communication between closely apposed membranes is proposed at membrane contact sites (MCS). However, the regulation of MCS structure and their functional relevance in vivo remain debated. The extended synaptotagmins (Esyt) are evolutionarily conserved proteins proposed to function at MCS. However, loss of all three Esyts in yeast or mammals shows minimal phenotypes questioning the functional importance of Esyt. We report that in Drosophila photoreceptors, MCS number is regulated by PLCβ activity. Photoreceptors of a null allele of Drosophila extended synaptotagmin (dEsyt) show loss of ER-PM MCS. Loss of dEsyt results in mislocalization of RDGB, an MCS localized lipid transfer protein, required for photoreceptor structure and function, ultimately leading to retinal degeneration. dEsyt depletion enhanced the retinal degeneration, reduced light responses and slower rates of plasma membrane PIP resynthesis seen in rdgB mutants. Thus, dEsyt function and PLCβ signaling regulate ER-PM MCS structure and lipid transfer in Drosophila photoreceptors.