We identified the Drosophila melanogaster Signal peptide peptidase gene (Spp) that encodes a multipass transmembrane aspartyl protease. Drosophila SPP is homologous to the human signal peptide peptidase (SPP) and is distantly related to the presenilins. We show that, like human SPP, Drosophila SPP can proteolyze a model signal peptide and is sensitive to an SPP protease inhibitor and that it localizes to the endoplasmic reticulum. Expression of Drosophila SPP was first apparent at germ band extension, and in late embryos it was robust in the salivary glands, proventriculus, and tracheae. Flies bearing mutations in conserved residues or carrying deficiencies for the Spp gene had defective tracheae and died as larvae.