The modifier of mdg4, mod(mdg4), locus in Drosophila melanogaster represents a new type of complex gene in which functional diversity is resolved by mRNA trans-splicing. A protein family of Ͼ30 transcriptional regulators, which are supposed to be involved in higher-order chromatin structure, is encoded by both DNA strands of this locus. Mutations in mod(mdg4) have been identified independently in a number of genetic screens involving position-effect variegation, modulation of chromatin insulators, apoptosis, pathfinding of nerve cells, and chromosome pairing, indicating pleiotropic effects. The unusual gene structure and mRNA trans-splicing are evolutionary conserved in the distantly related species Drosophila virilis. Chimeric mod(mdg4) transcripts encoded from nonhomologous chromosomes containing the splice donor from D. virilis and the acceptor from D. melanogaster are produced in transgenic flies. We demonstrate that a significant amount of protein can be produced from these chimeric mRNAs. The evolutionary and functional conservation of mod(mdg4) and mRNA trans-splicing in both Drosophila species is furthermore demonstrated by the ability of D. virilis mod(mdg4) transgenes to rescue recessive lethality of mod(mdg4) mutant alleles in D. melanogaster.T HE majority of genes in higher eukaryotes repreencoded by the four 5Ј-exons but differ in their C-terminal region encoded by alternative 3Ј-exons. This kind sents monocistronic units where noncoding intron regions interrupt the protein-coding exon sequences.of trans-splicing clearly differs from splice leader transsplicing that predominates in Caenorhabditis and TryThe resulting mature mRNA usually encodes a unique panosomes where polycistronic transcripts are resolved polypeptide. Recent advances in genome analysis of sevby addition of noncoding leader sequences (Blumeneral model organisms and the molecular characterizathal 1998). Mutational dissection and differential bindtion of a large number of genes revealed that alternative ing of Mod(mdg4) isoforms on polytene chromosomes pre-mRNA splicing is one of the main mechanisms gensuggest that the variable C-terminal regions encoded by erating a highly expanded proteome diversity.