In mammals, the JAK/STAT (Janus Kinase/Signal Transducer and Activator of Transcription) signaling pathway is activated in response to cytokines and growth factors to control blood cell development, proliferation and cell determination. In Drosophila, a conserved JAK/STAT signaling pathway controls segmentation in embryos, as well as blood cell development and other processes in larvae and adults. During embryogenesis, transduction of the Unpaired [Upd; also known as Outstretched (Os)] ligand through the JAK/STAT pathway requires Domeless, a putative membrane protein with distant homology to vertebrate type I cytokine receptors. We have isolated domeless (dome) in a screen to identify genes essential in epithelial morphogenesis during oogenesis. The level of dome activity is critical for proper border cell migration and is controlled in part through a negative feedback loop. In addition to its essential role in border cells, we show that dome is required in the germarium for the polarization of follicle cells during encapsulation of germline cells. In this process, dome controls the expression of the apical determinant Crumbs. In contrast to the ligand Upd, whose expression is limited to a pair of polar cells at both ends of the egg chamber, dome is expressed in all germline and follicle cells. However, the Dome protein is specifically localized at apicolateral membranes and undergoes ligand-dependent internalization in the follicle cells. dome mutations interact genetically with JAK/STAT pathway genes in border cell migration and abolish the nuclear translocation of Stat92E in vivo. We also show that dome functions downstream of upd and that both the extracellular and intracellular domains of Dome are required for JAK/STAT signaling. Altogether, our data indicate that Dome is an essential receptor molecule for Upd and JAK/STAT signaling during oogenesis.