In Drosophila embryos, dorsal-ventral polarity is defined by a signal transduction pathway that regulates nuclear import of the Dorsal protein. Dorsal protein's ability to act as a transcriptional activator of some zygotic genes and a repressor of others defines structure along the dorsal-ventral axis. Dorsal is a member of a group of proteins, the Rel-homologous proteins, whose activity is regulated at the level of nuclear localization. Dif, a more recently identified Drosophila Rel-homologue, has been proposed to act as a mediator of the immune response in Drosophila. In an effort to understand the function and regulation of Rel-homologous proteins in Drosophila, we have expressed Dif protein in Drosophila embryos derived from dorsal mutant mothers. We found that the Dif protein was capable of restoring embryonic dorsal-ventral pattern elements and was able to define polarity correctly with respect to the orientation of the egg shell. This, together with the observation that the ability of Dif to restore a dorsal-ventral axis depended on the signal transduction pathway that normally regulates Dorsal, suggests that Dif protein formed a nuclear concentration gradient similar to that seen for Dorsal. By studying the expression of Dorsal target genes we found that Dif could activate the zygotic genes that Dorsal activates and repress the genes repressed by Dorsal. Differences in the expression of these target genes, as well as the results from interaction studies carried out in yeast, suggest that Dif is not capable of synergizing with the basic helix-loop-helix transcription factors with which Dorsal normally interacts, and thereby lacks an important component of Dorsal-mediated pattern formation.