The Drosophila tumor suppressor gene lethal(2) giant larvae (lgl) encodes a cytoskeletal protein required for the change in shape and polarity acquisition of epithelial cells, and also for asymmetric division of neuroblasts. We show here that lgl participates in the emission of Decapentaplegic (Dpp), a member of the transforming growth factor beta (TGFbeta) family, in various developmental processes. During embryogenesis, lgl is required for the dpp-dependent transcriptional activation of zipper (zip), which encodes the non-muscle myosin heavy chain (NMHC), in the dorsalmost ectodermal cells - the leading edge cells. The embryonic expression of known targets of the dpp signaling pathway, such as labial or tinman was abolished or strongly reduced in lgl mutants. lgl mutant cuticles exhibited phenotypes resembling those observed in mutated partners of the dpp signaling pathway. In addition, lgl was required downstream of dpp and upstream of its receptor Thickveins (Tkv) for the dorsoventral patterning of the ectoderm. During larval development, the expression of spalt, a dpp target, was abolished in mutant wing discs, while it was restored by a constitutively activated form of Tkv (Tkv(Q253D)). Taking into account that the activation of dpp expression was unaffected in the mutant, this suggests that lgl function is not required downstream of the Dpp receptor. Finally, the function of lgl responsible for the activation of Spalt expression appeared to be required only in the cells that produce Dpp, and lgl mutant somatic clones behaved non autonomously. We therefore position the activity of lgl in the cells that produce Dpp, and not in those that respond to the Dpp signal. These results are consistent with a same role for lgl in exocytosis and secretion as that proposed for its yeast ortholog sro7/77 and lgl might function in parallel or independently of its well-documented role in the control of epithelial cell polarity.