Formation of the tail region of the Drosophila larva requires the activities of the terminal class genes. Genetic and molecular analyses of these genes suggests that localized activation of the receptor tyrosine kinase torso at the posterior egg pole triggers a signal transduction pathway. This pathway, mediated through the serine/threonine protein kinase D-raf and the protein tyrosine phosphatase corkscrew, controls the domains of expression of the transcription factors tailless and huckebein. In this paper, we report the molecular and developmental characterization of mutations in the D-raf gene. We show that mutations that alter conserved residues known to be necessary for kinase activity are associated with a null phenotype, demonstrating that D-raf kinase activity is required for its role in torso signaling. Another mutation, D-rafPB26, which prematurely truncates the kinase domain shows a weaker maternal effect phenotype that is strikingly similar to the corkscrew maternal effect phenotype, suggesting that a lower amount of kinase activity decreases the terminal signaling pathway. Finally, molecular and developmental characterization of two mutations that affect the late D-raf zygotic function(s) implies a novel role for D-raf in cell fate establishment in the eye. One of these mutations, D-rafC110, is associated with a single amino acid change within the putative D-raf regulatory region, while the other, D-rafHM-7, most likely reduces the wild-type amount of D-raf protein.