In nervous systems, retrograde signals are key for organizing circuit activity and maintaining neuronal homeostasis. We identify the conserved Allnighter (Aln) pseudokinase as a cell non-autonomous regulator of proteostasis responses necessary for normal sleep and structural plasticity ofDrosophilaphotoreceptors. Inalnmutants exposed to extended ambient light, proteostasis is dysregulated and photoreceptors develop striking, but reversible, dysmorphology. Thealngene is widely expressed in different neurons, but not photoreceptors. However, secreted Aln protein is retrogradely endocytosed by photoreceptors. Inhibition of photoreceptor synaptic release reduces Aln levels in lamina neurons, consistent with secreted Aln acting in a feedback loop. In addition,alnmutants exhibit reduced night time sleep, providing a molecular link between dysregulated proteostasis and sleep, two characteristics of ageing and neurodegenerative diseases.