The JAK/STAT signal transduction pathway has been conserved throughout evolution such that true structural and functional homologues of components originally identified in vertebrate systems are also present in the model genetic system Drosophila melanogaster. In addition to roles during larval hematopoiesis reminiscent of the requirement for this pathway in mammalian systems, the JAK/STAT pathway in Drosophila is also involved in a number of other developmental events. Recent data has demonstrated further roles for the JAK/STAT pathway in the establishment of sexual identity via the early embryonic expression of Sex lethal, the segmentation of the embryo via the control of pair rule genes including even skipped and the establishment of polarity within the adult compound eye via a mechanism that includes the four jointed gene. Use of the powerful genetics in the model organism Drosophila may identify new components of the JAK/STAT pathway, define new roles for this pathway, and provide insights into the function of this signal transduction system. Here we review the roles of STAT and its associated signaling pathway during both embryonic and adult stages of Drosophila development and discuss future prospects for the identification and characterization of novel pathway components and targets. Oncogene (2000).