An oligonucleotide based on the cdc 10/SWI6 repeats of the Drosophila Notch protein was used to isolate other Drosophila genes with these repeats. One of these genes is the cactus locus, 1 of 11 genes required maternally for the establishment in embryos of a gradient of nuclear localization of dorsal protein, a rel-like transcription factor. Previous work showed that in cactus mutants more dorsal protein enters the nucleus in dorsal regions, resulting in a ventralized phenotype. It is now shown that the cactus locus produces two proteins that differ at their carboxy termini; both contain six cdc 10/SWI6 repeats that are sufficient for binding to dorsal and for inhibiting the ability of dorsal to bind DNA. The site on dorsal to which cactus binds was localized to the rel homology domain, where it overlaps with, or is adjacent to, the nuclear localization signal. In vivo the bulk of the cactus protein associated with dorsal is phosphorylated. This, or the association with dorsal, appears to stabilize the maternal cactus protein.