Inhibition of postsynaptic glutamate receptors at the Drosophila NMJ initiates a compensatory increase in presynaptic release termed synaptic homeostasis. BMP signaling is necessary for normal synaptic growth and stability. It remains unknown whether BMPs have a specific role during synaptic homeostasis and, if so, whether BMP signaling functions as an instructive retrograde signal that directly modulates presynaptic transmitter release. Here, we demonstrate that the BMP receptor (Wit) and ligand (Gbb) are necessary for the rapid induction of synaptic homeostasis. We also provide evidence that both Wit and Gbb have functions during synaptic homeostasis that are separable from NMJ growth. However, further genetic experiments demonstrate that Gbb does not function as an instructive retrograde signal during synaptic homeostasis. Rather, our data indicate that Wit and Gbb function via the downstream transcription factor Mad and that Mad-mediated signaling is continuously required during development to confer competence of motoneurons to express synaptic homeostasis.