A critical step in pattern formation in Drosophila is the establishment of polarity along the two major body axes. At least 20 maternally active genes are involved in creating dorsal-ventral polarity. A variety of experiments have shown that dorsal represents the last step in the process, it acts as the ventral morphogen relating the maternal positional information to the zygotic genome. We have cloned and characterized the dorsal gene and found it is closely related to the vertebrate proto-oncogene c-rel. In wild-type embryos, the dorsal protein is present in the cytoplasm during cleavage. After the nuclei migrate to the periphery of the embryo, a ventral-to-dorsal gradient of nuclear dorsal protein is established. The formation of the nuclear gradient is disrupted in mutant embryos from other maternally active dorsal-ventral polarity genes. In dorsalized mutant embryos, only cytoplasmic protein is observed, while in ventralized embryos, the nuclear gradient is shifted dorsally. Relocalization of the dorsal protein from the cytoplasm to the nucleus appears critical for dorsal to function as a morphogen. We propose a number of experiments that address the two basic questions of (1) how is the nuclear gradient formed and what factors are involved, and (2) how does dorsal exert its function as a morphogen.