Analysis of the retinal defects of a CK2 phosphomimetic variant of E(spl)M8 (M8S(159)D) and the truncated protein M8* encoded by the E(spl)D allele, suggest that the nonphosphorylated CtD "autoinhibits" repression. We have investigated this model by testing for inhibition (in "trans") by the CtD fragment in its nonphosphorylated (M8-CtD) and phosphomimetic (M8SD-CtD) states. In N(+) flies, ectopic M8-CtD compromises lateral inhibition, i.e., elicits supernumerary bristles as with loss of N signaling. This antimorphic activity of M8-CtD strongly rescues the reduced eye and/or bristle loss phenotypes that are elicited by ectopic M8SD or wild type M8. Additionally, the severely reduced eye of N(spl)/Y; E(spl)D/+ flies is also rescued by M8-CtD. Rescue is specific to the time and place, the morphogenetic furrow, where "founding" R8 photoreceptors are specified. In contrast, the phosphomimetic M8SD-CtD that is predicted to be deficient for autoinhibition, exhibits significantly attenuated or negligible activity. These studies provide evidence that autoinhibition by the CtD regulates M8 activity in a phosphorylation-dependent manner.