ABSTRACT The Rho subfamily of Ras-related small GTP-binding proteins is involved in regulation of the cytoskeleton. The cytoskeletal changes induced by two members of this subfamily, Rho and Rac, in response to growth factor stim-ulation, have dramatic effects on cell morphology. We are interested in using Drosophila as a system for studying how such effects participate in development. We have identified two Drosophila genes, DRacA and DRacB, encoding proteins with homology to mammalian Rac1 and Rac2. We have made transgenic flies bearing dominant inhibitory (N17DRacA), and wild-type versions of the DRacA cDNA under control of an Hsp70 promoter. Expression of the N17DRacA transgene during embryonic development causes a high frequency of defects in dorsal closure which are due to disruption of cell shape changes in the lateral epidermis. Embryonic expression of N17DRacA also affects germband retraction and head involution. The epidermal cell shape defects caused by expression of N17DRacA are accompanied by disruption of a localized accumulation of actin and myosin thought to be driving epidermal cell shape change. Thus the Rho subfamily may be generating localized changes in the cytoskeleton during Drosophila development in a similar fashion to that seen in mammalian and yeast cells. The Rho subfamily is likely to be partic-ipating in a wide range of developmental processes in Drosophila through its regulation of the cytoskeleton.