Dorsoventral (D/V) patterning in Drosophila oogenesis is initiated by the transmission of a TGF-alpha-like ligand, Gurken (Grk), from the oocyte to the anterodorsal follicle cells, activating the EGF receptor (Egfr) signaling pathway. The zinc-finger transcription factor CF2 is a negative regulator of the rhomboid (rho) gene that encodes an essential membrane-bound component of the dorsalizing pathway. Expression of CF2 itself is negatively regulated by the activated Egfr. In this report, we demonstrate that CF2 is the target of down-regulation by the MAPK kinase cascade, and that this down-regulation is independent of the Rho function. These results suggest that D/V patterning involves a two-step signaling process: the initial Egfr signal, which represses CF2 and induces rho expression; and the subsequent Egfr + Rho signal, which determines the dorsal cell fates. Furthermore, we show that CF2 down-regulation occurs at the post-translational level through a mechanism involving coupled cytoplasmic retention and degradation.