The neuropeptide PDF is crucial for Drosophila circadian behavior: it keeps circadian neurons synchronized. Here, we identify GW182 as a key regulator of PDF signaling. Indeed, GW182 downregulation results in phenotypes similar to those of Pdf and Pdf-receptor (Pdfr) mutants. gw182 genetically interacts with Pdfr and cAMP signaling, which is essential for PDFR function. GW182 mediates miRNA-dependent gene silencing through its interaction with AGO1. Consistently, GW182's AGO1 interaction domain is required for GW182's circadian function. Moreover, our results indicate that GW182 modulates PDFR signaling by silencing the expression of the cAMP phosphodiesterase DUNCE. Importantly, this repression is under photic control, and GW182 activity level--which is limiting in circadian neurons--influences the responses of the circadian neural network to light. We propose that GW182's gene silencing activity functions as a rheostat for PDFR signaling and thus profoundly impacts the circadian neural network and its response to environmental inputs.