A relatively small number of proteins have been suggested to act as morphogens-signalling molecules that spread within tissues to organize tissue repair and the specification of cell fate during development. Among them are Wnt proteins, which carry a palmitoleate moiety that is essential for signalling activity1-3. How a hydrophobic lipoprotein can spread in the aqueous extracellular space is unknown. Several mechanisms, such as those involving lipoprotein particles, exosomes or a specific chaperone, have been proposed to overcome this so-called Wnt solubility problem4-6. Here we provide evidence against these models and show that the Wnt lipid is shielded by the core domain of a subclass of glypicans defined by the Dally-like protein (Dlp). Structural analysis shows that, in the presence of palmitoleoylated peptides, these glypicans change conformation to create a hydrophobic space. Thus, glypicans of the Dlp family protect the lipid of Wnt proteins from the aqueous environment and serve as a reservoir from which Wnt proteins can be handed over to signalling receptors.