Receptor protein tyrosine phosphatases (RPTPs) control many aspects of nervous system development. At the Drosophila neuromuscular junction (NMJ), regulation of synapse growth and maturation by the RPTP LAR depends on catalytic phosphatase activity and on the extracellular ligands Syndecan and Dally-like. We show here that the function of LAR in controlling R7 photoreceptor axon targeting in the visual system differs in several respects. The extracellular domain of LAR important for this process is distinct from the domains known to bind Syndecan and Dally-like, suggesting the involvement of a different ligand. R7 targeting does not require LAR phosphatase activity, but instead depends on the phosphatase activity of another RPTP, PTP69D. In addition, a mutation that prevents dimerization of the intracellular domain of LAR interferes with its ability to promote R7 targeting, although it does not disrupt phosphatase activity or neuromuscular synapse growth. We propose that LAR function in R7 is independent of its phosphatase activity, but requires structural features that allow dimerization and may promote the assembly of downstream effectors.