fused (fu) is a segment-polarity gene encoding a putative serine-threonine kinase. In a wild-type context, all fu mutations display the same set of phenotypes. Nevertheless, mutations of the Suppressor of fused [Su(fu)] gene define three classes of alleles (fuO, fuI, fuII). Here, we report the molecular analysis of known fu mutations and the generation of new alleles by in vitro mutagenesis. We show that the Fused (Fu) protein functions in vivo as a kinase. The N-terminal kinase and the extreme C-terminal domains are necessary for Fu+ activity while a central region appears to be dispensable. We observe a striking correlation between the molecular lesions of fu mutations and phenotype displayed in their interaction with Su(fu). Indeed, fuI alleles which are suppressed by Su(fu) mutations are defined by inframe alterations of the N-terminal catalytic domain whereas the C-terminal domain is missing or altered in all fuII alleles. An unregulated FuII protein, which can be limited to the 80 N-terminal amino acids of the kinase domain, would be responsible for the neomorphic costal-2 phenotype displayed by the fuII-Su(fu) interaction. We propose that the Fu C-terminal domain can differentially regulate the Fu catalytic domain according to cell position in the parasegment.