We present the cloning and characterization of mei-P26, a novel P-element-induced exchange-defective female meiotic mutant in Drosophila melanogaster. Meiotic exchange in females homozygous for mei-P26(1) is reduced in a polar fashion, such that distal chromosomal regions are the most severely affected. Additional alleles generated by duplication of the P element reveal that mei-P26 is also necessary for germline differentiation in both females and males. To further assess the role of mei-P26 in germline differentiation, we tested double mutant combinations of mei-P26 and bag-of-marbles (bam), a gene necessary for the control of germline differentiation and proliferation in both sexes. A null mutation at the bam locus was found to act as a dominant enhancer of mei-P26 in both males and females. Interestingly, meiotic exchange in mei-P26(1); bam(Delta)(86)/+ females is also severely decreased in comparison to mei-P26(1) homozygotes, indicating that bam affects the meiotic phenotype as well. These data suggest that the pathways controlling germline differentiation and meiotic exchange are related and that factors involved in the mitotic divisions of the germline may regulate meiotic recombination.