Strain AK127 is a developmental mutant of Dictyostelium discoideum that was isolated by restriction enzyme-mediated integration (REMI). Mutant cells aggregate normally but are unable to proceed past the loose aggregate stage. The cloned gene, lagC (loose aggregate C), encodes a novel protein of 98 kD that contains an amino-terminal signal sequence and a putative carboxy-terminal transmembrane domain. The mutant strain AK127 shows no detectable lagC transcript upon Northern analysis, indicating that the observed phenotype is that of a null allele. Expression of the lagC cDNA in AKI27 cells complements the arrest at the loose aggregate stage, indicating that the mutant phenotype results from disruption of the lagC gene. In wild-type cells, lagC mRNA is induced at the loose aggregate stage and is expressed through the remainder of development, lagC-null cells aggregate but then disaggregate and reaggregate to form small granular mounds. Mature spores are produced at an extremely low efficiency (<0.1% of wild type), appearing only after -72 hr, whereas wild-type strains produce mature spores by 26 hr. lagC-null cells accumulate reduced levels of transcripts for the prestalk-enriched genes rasD and CP2 and do not express the DIF-induced prestalk-specific gene ecmA or the cAMP-induced prespore-specific gene SP60 to significant levels. In chimeric organisms resulting from the coaggregation of lagC-null and wild-type cells, cell-type-specific gene expression is rescued in the lagC-null cells; however, lagC-prespore cells are localized to the posterior of the prespore region and do not form mature spores, suggesting that LagC protein has both no cell-autonomous and cell-autonomous functions. Overexpression of lagC from an actin promoter in both wild-type and lagC-cells causes a delay at the tight aggregate stage, the first stage requiring LagC activity. These results suggest that the LagC protein functions as a nondiffusible cell-cell signaling molecule that is required for multicellular development.