Activation of the Drosophila epidermal growth factor receptor (DER) by the transmembrane ligand, Spitz (Spi), requires two additional transmembrane proteins, Rhomboid and Star. Genetic evidence suggests that Rhomboid and Star facilitate DER signaling by processing membrane-bound Spi (mSpi) to an active, soluble form. To test this model, we use an assay based on Xenopus animal cap explants in which Spi activation of DER is Rhomboid and Star dependent. We show that Spi is on the cell surface but

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... s kept in an inactive state by its cytoplasmic and transmembrane domains; Rhomboid and Star relieve this inhibition, allowing Spi to signal. We show further that Spi is likely to be cleaved within its transmembrane domain. However, a mutant form of mSpi that is not cleaved still signals to DER in a Rhomboid and Star-dependent manner. These results suggest strongly that Rhomboid and Star act primarily to present an active form of Spi to DER, leading secondarily to the processing of Spi into a secreted form.