Synaptic plasticity is mediated by the dynamic localization of proteins to and from synapses. This is controlled, in part, through activity-induced palmitoylation of synaptic proteins. Here we report that the ability of the palmitoyl-acyl transferase, DHHC5, to palmitoylate substrates in an activity-dependent manner is dependent on changes in its subcellular localization. Under basal conditions, DHHC5 is bound to PSD-95 and Fyn kinase, and is stabilized at the synaptic membrane through Fyn-mediated phosphorylation of a tyrosine residue within the endocytic motif of DHHC5. In contrast, DHHC5's substrate, δ-catenin, is highly localized to dendritic shafts, resulting in the segregation of the enzyme/substrate pair. Neuronal activity disrupts DHHC5/PSD-95/Fyn kinase complexes, enhancing DHHC5 endocytosis, its translocation to dendritic shafts and its association with δ-catenin. Following DHHC5-mediated palmitoylation of δ-catenin, DHHC5 and δ-catenin are trafficked together back into spines where δ-catenin increases cadherin stabilization and recruitment of AMPA receptors to the synaptic membrane.