Dual leucine-zipper kinase (DLK) is critical for axon-to-soma retrograde signaling following nerve injury. However, it is unknown how DLK, a predicted soluble kinase, conveys long-distance signals and why homologous kinases cannot compensate for loss of DLK. Here, we report that DLK, but not homologous kinases, is palmitoylated at a conserved site adjacent to its kinase domain. Using short-hairpin RNA knockdown/rescue, we find that palmitoylation is critical for DLK-dependent retrograde signaling in sensory axons. This functional importance is because of three novel cellular and molecular roles of palmitoylation, which targets DLK to trafficking vesicles, is required to assemble DLK signaling complexes and, unexpectedly, is essential for DLK's kinase activity. By simultaneously controlling DLK localization, interactions, and activity, palmitoylation ensures that only vesiclebound DLK is active in neurons. These findings explain how DLK specifically mediates nerve injury responses and reveal a novel cellular mechanism that ensures the specificity of neuronal kinase signaling.