The short gastrulation (sog) and decapentaplegic (dpp) genes function antagonistically in the early Drosophila zygote to pattern the dorsoventral (DV) axis of the embryo. This interplay between sog and dpp determines the extent of the neuroectoderm and subdivides the dorsal ectoderm into two territories. Here, we present evidence that sog and dpp also play opposing roles during oogenesis in patterning the DV axis of the embryo. We show that maternally produced Dpp increases levels of the I(kappa)B-related protein Cactus and reduces the magnitude of the nuclear concentration gradient of the NF(kappa)B-related Dorsal protein, and that Sog limits this effect. We present evidence suggesting that Dpp signaling increases Cactus levels by reducing a signal-independent component of Cactus degradation. Epistasis experiments reveal that sog and dpp act downstream of, or in parallel to, the Toll receptor to reduce translocation of Dorsal protein into the nucleus. These results broaden the role previously defined for sog and dpp in establishing the embryonic DV axis and reveal a novel form of crossregulation between the NF(kappa)B and TGF(beta) signaling pathways in pattern formation.