The Stubble-stubbloid (Sb-sbd) gene is required for hormone-dependent epithelial morphogenesis of imaginal discs of Drosophila, including the formation of bristles, legs, and wings. The gene has been cloned by using Sb-sbd-associated DNA lesions in a 20-kilobase (kb) region of a 263-kb genomic walk. The region specifies an -3.8-kb transcript that is induced by the steroid hormone 20-hydroxyecdysone in imaginal discs cultured in vitro. The conceptually translated protein is an apparent 786-residue type II transmembrane protein (N terminus in, C terminus out), including an intracellular N-terminal domain of at least 35 residues and an extracellular C-terminal trypsin-like serine protease domain of 244 residues. Sequence analyses indicate that the Sb-sbd-encoded protease could activate itself by proteolytic cleavage. Consistent with the cell-autonomous nature of the Sb-sbd bristle phenotype, a disulfide bond between cysteine residues in the noncatalytic N-terminal fragment and the C-terminal catalytic fragment could tether the protease to the membrane after activation. Both dominant Sb and recessive sbd mutations affect the organization of microfilament bundles during bristle morphogenesis. We propose that the Sb-sbd product has a dual function. (i) It acts through its proteolytic extraceliular domain to detach imaginal disc cells from extracellular matrices, and (it) it transmits an outside-to-inside signal to its intracellular domain to modify the cytoskeleton and facilitate cell shape changes underlying morphogenesis.The attachment of cells to extracellular substrates-for example, by integrins (1)-plays an important role in determining cell shape and the intracellular organization of the cytoskeleton. Likewise, detachment of cells from substrates also leads to profound changes in cell shape and cytoskeletal organization. In particular, cell surface-associated proteases have been shown to mediate cell shape changes by local degradation of extracellular matrices and by signaling the reorganization of the actin cytoskeleton (2, 3). Proteases are also implicated in morphogenesis of imaginal discs to form adult appendages in Drosophila (4-7). The formation of legs and wings from discs results in part from actin-and myosindependent cell shape changes in the disc epithelium elicited by the steroid hormone 20-hydroxyecdysone (20HE) (8). Later in development, specific disc cells undergo actinmediated cell shape changes to form bristles (9, 10). Stubblestubbloid (Sb-sbd) mutants cause failures in cell-shape changes required for both disc and bristle morphogenesis. Gain-of-function Sb mutations affect bristle morphogenesis in a dominant manner. Both Sb and allelic loss-of-function sbd mutations act recessively to affect disc morphogenesis, producing characteristically malformed legs and wings (11).The publication costs of this article were defrayed in part by page charge payment. This article must therefore be hereby marked "advertisement" in accordance with 18 U.S.C. §1734 solely to indicate this fact.We show here...