In the absence of a vg+ gene, extensive cell death occurs in third instar imaginal discs, which results in a complete loss of adult wing margin structures. Essentially all molecularly characterized vg alleles are associated with deletions or insertions of DNA into the vg locus. These alterations reduce or eliminate a 3.8-kb vg-specific transcript, resulting in recessive loss of function alleles. We report here the analysis of two dominant vg alleles which have been identified (vgU and vgW). The vgU allele is associated with a chromosomal inversion which splits the vg locus, resulting in a gene fusion between vg and the mastermind (mam) neurogenic locus. Reversion analysis of vgU indicates that sequences from the mam locus are required for vgU dominance. The vgW allele is also the result of a chromosomal inversion, in this case resulting in a gene fusion between vg and the homeobox-containing invected (inv) gene. It is also associated with novel dominant homeotic transformations. Revertant analysis indicates that sequences from inv are required for the dominant wing and dominant homeotic effects of vgW. The vg dominance does not appear to be mediated through a reduction of vg expression or a novel fusion transcript in either vgU or vgW. The results are consistent with a model in which inappropriate expression of inv causes the dominant homeotic effects seen in vgW.