The tumour suppressor gene lethal (2) giant discs (lgd) is involved in endosomal trafficking of transmembrane proteins in Drosophila. Loss of function results in the ligand-independent activation of the Notch pathway in all imaginal disc cells and follicle cells. Analysis of lgd loss of function has largely been restricted to imaginal discs and suggests that no other signalling pathway is affected. The devotion of Lgd to the Notch pathway was puzzling given that lgd loss of function also affects trafficking of components of other signalling pathways, such as the Dpp (a Drosophila BMP) pathway. Moreover, Lgd physically interacts with Shrub, a fundamental component of the ESCRT trafficking machinery, whose loss of function results in the activation of several signalling pathways. Here, we show that during oogenesis lgd loss of function causes ectopic activation of the Drosophila BMP signalling pathway. This activation occurs in somatic follicle cells as well as in germline cells. The activation in germline cells causes an extra round of division, producing egg chambers with 32 instead of 16 cells. Moreover, more germline stem cells were formed. The lgd mutant cells are defective in endosomal trafficking, causing an accumulation of the type I Dpp receptor Thickveins in maturing endosomes, which probably causes activation of the pathway. Taken together, these results show that lgd loss of function causes various effects among tissues and can lead to the activation of signalling pathways other than Notch. They further show that there is a role for the endosomal pathway during oogenesis.