The JAK/STAT pathway is an essential signalling cascade required for multiple processes during both development and for adult homeostasis. A key question in understanding this pathway is how it is regulated in different cell contexts. Here we have examined how endocytic processing contributes to signalling by the single cytokine receptor, Domeless, in Drosophila melanogaster cells. We identify an evolutionarily conserved di-Leu motif that is required for Domeless internalisation and show that endocytosis is required for activation of a subset of Domeless targets. Our data indicate that endocytosis both qualitatively and quantitatively regulates Domeless signalling. STAT92E, the single STAT transcription factor in Drosophila, appears to be the target of endocytic regulation and our studies show that phosphorylation of STAT92E on Tyr704, while necessary, is not always sufficient for target transcription. Finally, we identify a conserved residue, Thr702, which is essential for Tyr704 phosphorylation. Taken together, our findings identify previously unknown aspects of JAK/STAT pathway regulation likely to play key roles in the spatial and temporal regulation of signalling in vivo.