Specification of dorsal-ventral cell fate during Drosophila embryogenesis is mediated by a signal transduction pathway. Asymmetry of cell fates arises through the spatially restricted production of a ligand in an extracellular compartment called the perivitelline space. The snake and easter genes are required for the production of the ligand and they encode the proenzyme form of secreted extracellular serine proteases. We have examined the effect of producing a preactivated form of the snake protease on the generation of dorsal-ventral polarity. SP6 RNA microinjection experiments reveal that different cell fates acquired at cellular blastoderm can be specified by the amount and spatial distribution of activated snake protein. Our results support a protease cascade model in which localized activation of uniformly distributed protease proenzymes leads to the spatially restricted production of ligand in the perivitelline space on the ventral side of the embryo.