Mutant alleles of the Drosophila decapentaplegic (dpp) gene affect embryonic dorsal-ventral pattern formation, larval viability, and adult cuticle formation from the imaginal disks. The dpp DNA required for this array of functions spans almost 50 kb. We report that the embryonic lethal, ventralizing alleles of the dpp gene are rescued in transgenic animals by an 8-kb fragment of the wild-type dpp DNA. Full rescue, from embryonic lethality to adult viability, is obtained in two situations: in animals hemizygous for the haplolethal dpp gene, and in animals hemizygous for either of two recessive embryonic lethal alleles. In embryos null for dpp, the transformation of dorsal cuticle to ventral cuticle is blocked by one copy of the dpp transposon; two copies permit the hatching of the larvae. The portion of dpp sufficient for these embryonic functions encodes a protein with homology to the transforming growth factor-beta (TGF-beta) family of proteins (Padgett et al. 1987). The larval and imaginal disk functions of dpp are not rescued by the 8-kb portion of the gene and must require additional sequences from the 50 kb of DNA.