Cdc42, a member of the Rho family of GTP binding proteins, functions in the formation of polarized actin structures, in elongation of cell shape, and in cell signaling. Although genetic mutations previously have not been available in multicellular organisms, studies have attempted to discern Cdc42 functions in organisms, including Drosophila, using dominant active or interfering alleles. Here, for the first time, we examine the functions of Cdc42 in developing tissues using loss-of-function mutations in the Drosophila Cdc42 gene. We find that Cdc42(-) epithelial cells fail to elongate into a columnar cell shape and cannot maintain a monolayered epithelial structure. In contrast to previous studies, we find no requirement for Cdc42 in cell division or in activation of the Jun N-terminal kinase pathway. In addition, Cdc42 function is not required for cytoplasmic actin filament assembly in the nurse cells during oogenesis, although it may facilitate this process. Furthermore, our results indicate that Cdc42 plays a role in intercellular interactions between the germ line and the somatic follicle cells. These results confirm the role of Cdc42 in actin filament assembly and provide new insights into its functions in epithelial morphogenesis and regulating intercellular signaling events., (Copyright 2000 Academic Press.)