The rapid and orderly folding of epithelial tissue during developmental processes such as gastrulation requires the precise coordination of changes in cell shape. Here, we report that the perforin-like protein Torso-like (Tsl), the key extracellular determinant for Drosophila embryonic terminal patterning, also functions to control epithelial morphogenesis. We find that tsl null mutants display a ventral cuticular hole phenotype that is independent of the loss of terminal structures, and arises as a consequence of mesoderm invagination defects. We show that the holes are caused by uncoordinated constriction of ventral cell apices, resulting in the formation of an incomplete ventral furrow. Consistent with these data, we find that loss of tsl is sensitive to gene dosage of RhoGEF2, a critical mediator of Rho1-dependent ventral cell shape changes during furrow formation, suggesting that Tsl may act in this pathway. In addition, loss of tsl strongly suppressed the effects of ectopic expression of Fog, a secreted protein that promotes apical constriction. Taken together, our data suggests that Tsl controls Rho1-mediated apical constriction via Fog. We therefore propose that Tsl regulates extracellular Fog activity in order to synchronise cell shape changes and coordinate ventral morphogenesis in Drosophila. Identifying the Tsl mediated event that is common to both terminal patterning and morphogenesis will be valuable for our understanding of the extracellular control of developmental signalling by perforin-like proteins.