Cells need to correctly interpret their environment in space and time to determine specific biological functions. This is achieved by a set of cell surface growth factor and signaling receptors. The local activity of these receptors is precisely modulated by the fundamental process of clathrin-mediated endocytosis (CME), an integral part of the cellular trafficking machinery. This is a significant avenue of biomedical research as aberrations in this process in humans can lead to congenital anomalies, neurodegenerative and cardiovascular diseases, diabetes and cancer. While more than four decades of intensive research have revealed many molecular components of the clathrin endocytic machinery, several questions remain unanswered. Receptor internalization into endosomes following physical recognition by the core clathrin adaptor protein complex-2 (AP-2) and/ or clathrin-associated sorting proteins (CLASPs) in less than a minute is the principal event in CME. Internalization occurs from multiple, apparently independent clathrin bud sites on the plasma membrane, but how these positions are selected and how different cargo is simultaneously recognized is obscure. Moreover, how CME regulates specific signaling events in spatio-temporal manner in vivo remains poorly understood. Fcho1 and -2 are early arriving proteins at surface clathrin assemblies and are speculated to act as essential coat nucleators, preceding the core clathrin adaptor AP-2. Here, we show the C-terminal ?-homology domain (?HD) of Fcho1/2 represents a novel endocytic interaction hub. Translational silencing of fcho1 in zebrafish embryos causes strong dorsoventral patterning defects and developmental arrest analogous to bone morphogenetic protein (Bmp) signal failure. The FCHO1 ?HD interacts with the Bmp receptor Alk8, uncovering a new endocytic component that positively modulates Bmp signal transmission. Still, the fcho1 morphant phenotype is distinct from the severe embryonic defects apparent when AP-2 is depleted, indicating that Fcho1/2 does not dictate the temporal ordering of AP-2 during clathrin coat assembly. Our data thus challenge the primacy of Fcho1/2 in coat initiation. Furthermore, at molecular level, ap-2 morphants display aberrations in important signaling pathways during early embryonic development, mainly the fibroblast growth factor (Fgf) signaling. ap-2 morphants show elevated and broadened expression domains of components of Fgf signaling machinery indicating an altered Fgf signaling gradient. Together, it suggests that AP-2 plays a significant role in Fgf morphogengradient formation, maintenance or its interpretation. In summary, our studies reveal that CME is pivotal in decoding signal circuits in different ways that help cells correctly sense their environment and make key decisions.