Formins are key regulators of actin nucleation and elongation. Diaphanous-related formins, the best-known subclass, are activated by Rho and play essential roles in cytokinesis. In cultured cells, Diaphanous-related formins also regulate cell adhesion, polarity and microtubules, suggesting that they may be key regulators of cell shape change and migration during development. However, their essential roles in cytokinesis hamper our ability to test this hypothesis. We used loss- and gain-of-function approaches to examine the role of Diaphanous in Drosophila morphogenesis. We found that Diaphanous has a dynamic expression pattern consistent with a role in regulating cell shape change. We used constitutively active Diaphanous to examine its roles in morphogenesis and its mechanisms of action. This revealed an unexpected role in regulating myosin levels and activity at adherens junctions during cell shape change, suggesting that Diaphanous helps coordinate adhesion and contractility of the underlying actomyosin ring. We tested this hypothesis by reducing Diaphanous function, revealing striking roles in stabilizing adherens junctions and inhibiting cell protrusiveness. These effects also are mediated through coordinated effects on myosin activity and adhesion, suggesting a common mechanism for Diaphanous action during morphogenesis.