It is estimated that half of all proteins expressed in eukaryotic cells are transferred across or into at least one cellular membrane to reach their functional location. Protein translocation into the endoplasmic reticulum (ER) is critical to the subsequent localization of secretory and transmembrane proteins. A vital component of the translocation machinery is the signal peptidase complex (SPC)--which is conserved from yeast to mammals--and functions to cleave the signal peptide sequence (SP) of secretory and membrane proteins entering the ER. Failure to cleave the SP, due to mutations that abolish the cleavage site or reduce SPC function, leads to the accumulation of uncleaved proteins in the ER that cannot be properly localized resulting in a wide range of defects depending on the protein(s) affected. Despite the obvious importance of the SPC, in vivo studies investigating its function in a multicellular organism have not been reported. The Drosophila SPC comprises four proteins: Spase18/21, Spase22/23, Spase25 and Spase12. Spc1p, the S. cerevisiae homolog of Spase12, is not required for SPC function or viability; Drosophila spase12 null alleles, however, are embryonic lethal. The data presented herein show that spase12 LOF clones disrupt development of all tissues tested including the eye, wing, leg, and antenna. In the eye, spase12 LOF clones result in a disorganized eye, defective cell differentiation, ectopic interommatidial bristles, and variations in support cell size, shape, number, and distribution. In addition, spase12 mosaic tissue is susceptible to melanotic mass formation suggesting that spase12 LOF activates immune response pathways. Together these data demonstrate that spase12 is an essential gene in Drosophila where it functions to mediate cell differentiation and development. This work represents the first reported in vivo analysis of a SPC component in a multicellular organism.