The Drosophila melanogaster decapentaplegic (dpp) gene encodes a transforming growth factor beta-related cell signaling molecule that plays a critical role in dorsal/ventral pattern formation. The dpp expression pattern in the Drosophila embryo is dynamic, consisting of three phases. Phase I, in which dpp is expressed in a broad dorsal domain, depends on elements in the dpp second intron that interact with the Dorsal transcription factor to repress transcription ventrally. In contrast, phases II and III, in which dpp is expressed first in broad longitudinal stripes (phase II) and subsequently in narrow longitudinal stripes (phase III), depend on multiple independent elements in the dpp 5'-flanking region. Several aspects of the normal dpp expression pattern appear to depend on the unique properties of the dpp core promoter. For example, this core promoter (extending from -22 to +6) is able to direct a phase II expression pattern in the absence of additional upstream or downstream regulatory elements. In addition, a ventral-specific enhancer in the dpp 5'-flanking region that binds the Dorsal factor activates the heterologous hsp70 core promoter but not the dpp core promoter. Thus, the dpp core promoter region may contribute to spatially regulated transcription both by interacting directly with spatially restricted activators and by modifying the activity of proteins bound to enhancer elements.