Suppressor of fused, Su(fu), was identified as a semi-dominant suppressor of the putative serine/threonine kinase encoded by the segment polarity gene fused in Drosophila melanogaster. The amorphic Su(fu) mutation is viable, shows a maternal effect and displays no phenotype by itself. Su(fu) mutations are often found associated to karmoisin (kar) mutations but two complementation groups can be clearly identified. By using a differential hybridization screening method, we have cloned the Su(fu) region and identified chromosomal rearrangements associated with Su(fu) mutations. Two classes of cDNAs with similar developmental patterns, including a maternal contribution, are detectable in the region. Transformation experiments clearly assigned the Su(fu)+ function to one of these transcription units while the other one can be most likely assigned to the kar+ function. Surprisingly the 5' end of the kar RNA mapped within the 3' untranslated region of the Su(fu) transcribed sequence. The Su(fu) gene encodes a 53-kD protein, which contains a PEST sequence and shows no significant homologies with known proteins. Genetic analysis shows that proper development requires a fine tuning of the genetic doses of fu and Su(fu) both maternally and zygotically. These results, together with previous genetic and molecular data, suggest that fused and Suppressor of fused could act through a competitive posttraductionnal modification of a common target in the hedgehog signaling pathway.