Patterning of the anterior-posterior body axis during Drosophila development depends on the restriction of Nanos protein to the posterior of the early embryo. Synthesis of Nanos occurs only when maternally provided nanos RNA is localized to the posterior pole by a large, cis-acting signal in the nanos 3' untranslated region (3'UTR); translation of unlocalized nanos RNA is repressed by a 90 nucleotide Translational Control Element (TCE), also in the 3'UTR. We now show quantitatively that the majority of nanos RNA in the embryo is not localized to the posterior pole but is distributed throughout the cytoplasm, indicating that translational repression is the primary mechanism for restricting production of Nanos protein to the posterior. Through an analysis of transgenes bearing multiple copies of nanos 3'UTR regulatory sequences, we provide evidence that localization of nanos RNA by components of the posteriorly localized germ plasm activates its translation by preventing interaction of nanos RNA with translational repressors. This mutually exclusive relationship between translational repression and RNA localization is mediated by a 180 nucleotide region of the nanos localization signal, containing the TCE. These studies suggest that the ability of RNA localization to direct wild-type body patterning also requires recognition of multiple, unique elements within the nanos localization signal by novel factors. Finally, we propose that differences in the efficiencies with which different RNAs are localized result from the use of temporally distinct localization pathways during oogenesis.