Calcineurin is a Ca(2+)-calmodulin-activated, Ser-Thr protein phosphatase that is essential for the translation of Ca(2+) signals into changes in cell function and development. We carried out a dominant modifier screen in the Drosophila eye using an activated form of the catalytic subunit to identify new targets, regulators, and functions of calcineurin. An examination of 70,000 mutagenized flies yielded nine specific complementation groups, four that enhanced and five that suppressed the activated calcineurin phenotype. The gene canB2, which encodes the essential regulatory subunit of calcineurin, was identified as a suppressor group, demonstrating that the screen was capable of identifying genes relevant to calcineurin function. We demonstrated that a second suppressor group was sprouty, a negative regulator of receptor tyrosine kinase signaling. Wing and eye phenotypes of ectopic activated calcineurin and genetic interactions with components of signaling pathways suggested a role for calcineurin in repressing Egf receptor/Ras signal transduction. On the basis of our results, we propose that calcineurin, upon activation by Ca(2+)-calmodulin, cooperates with other factors to negatively regulate Egf receptor signaling at the level of sprouty and the GTPase-activating protein Gap1.