The innermost layer of the Drosophila eggshell, the vitelline membrane, provides structural support and positional information to the embryo. It is assembled in an incompletely understood manner from four major proteins to form a homogeneous, transparent extracellular matrix. Here we show that RNAi knockdown or genetic deletion of a minor constituent of this matrix, Palisade, results in structural disruptions during the initial synthesis of the vitelline membrane by somatic follicle cells surrounding the oocyte, including wide size variation among the precursor vitelline bodies and disorganization of follicle cell microvilli. Loss of Palisade or the microvillar protein Cad99C results in abnormal uptake into the oocyte of sV17, a major vitelline membrane protein, and defects in non-disulfide cross-linking of sV17 and sV23, while loss of Palisade has additional effects on processing and disulfide cross-linking of these proteins. Embryos surrounded by the abnormal vitelline membranes synthesized when Palisade is reduced are fertilized but undergo developmental arrest, usually during the first 13 nuclear divisions, with a nuclear phenotype of chromatin margination similar to that described for wild-type embryos subjected to anoxia. Our results demonstrate that Palisade is involved in coordinating assembly of the vitelline membrane and is required for functional properties of the eggshell.