The Drosophila eye is a highly ordered structure consisting of 800 identical ommatidia; their arrangement and their connections to the brain must be very precise so that the fly has an accurate view of the world. We are studying the mechanism by which this order arises during development. The secreted protein Hedgehog (Hh) induces photoreceptor differentiation and also indirectly induces its own expression, driving propagation of a wave of differentiation across the eye disc. Hh induces only the first photoreceptor to form within each cluster, R8; R8 then produces Spitz, a ligand for the Epidermal growth factor receptor (EGFR) that recruits additional photoreceptors to the cluster. These two conserved pathways also regulate growth and differentiation in vertebrates, and their misregulation can cause tumorigenesis. We are taking a genetic approach to identify other molecules involved in establishing the pattern of photoreceptor differentiation in the eye disc. We have discovered a number of novel components of the Hh and EGFR pathways and elucidated their mechanisms of action. One example is the rasp gene, which encodes a transmembrane acyltransferase that adds an essential palmitate modification to both Hh and Spitz. We have shown that palmitoylation of Spitz tethers it to the plasma membrane of producing cells, restricting its diffusion and thus increasing its local concentration. We are investigating the prevalence of lipid modifications of other secreted signaling proteins. We have also identified several novel proteins that act intracellularly in the EGFR pathway. All of them are conserved in humans and may be useful targets for cancer therapy. We are continuing to characterize additional genes from our autosomal screens, and are currently screening the X chromosome in order to complete our genetic analysis of eye development. In a second project, we are studying the effects of general transcriptional regulators on the transmission of specific developmental signals. Brahma chromatin remodeling complexes fall into two classes, which contain either the Osa subunit or two other subunits, BAP180 and BAP170. We are examining mutations in all three subunits to determine their functions in vivo. Osa is involved in Wingless target gene repression and the other two subunits in metamorphosis. We have also identified mutations in two components of the mediator complex, MED12 and MED13. Mutations in both genes have identical developmental phenotypes, affecting expression of Wingless target genes. Our current model is that these subunits act as specific adaptors to link the Wingless transcriptional complex to the mediator complex. Our third project is to study the mechanism of target layer selection by photoreceptor axons. We have found that the receptor protein tyrosine phosphatase (RPTP) LAR and the LAR-binding protein Liprin-? are specifically required for the axon of the UV-sensitive photoreceptor R7 to reach its normal termination layer. Although Liprin-? controls the localization of LAR in other systems, this does not appear to be the mechanism by which it promotes R7 targeting; we have found that LAR and Liprin-? have partially independent functions. RPTP regulation and signaling are poorly understood; we are searching for ligands and substrates for LAR in order to clarify these processes in a well-defined system. We are also investigating the functions of potential partner proteins for Liprin-?. Drosophila has two other Liprin family members; we have generated mutations in these and are examining their effects on axon targeting and synaptogenesis.