Biochemical interactions underlying the generation of the ventralising signal during Drosophila embryogenesis were investigated by the expression of recombinant Easter and Spätzle proteins. An active form of Easter protease cleaves the Spätzle protein, generating a carboxyterminal polypeptide fragment which, when microinjected into the perivitelline space of a spätzle deficient embryo, directs production of ventrolateral pattern elements. This Spätzle carboxyterminal fragment is a disulfide-linked dimer and modelling suggests that the core disulfide bonds and dimer arrangement of this fragment are highly similar to vertebrate nerve growth factor. Thus Spätzle is a member of a new family of neurotrophin-like signalling molecules in invertebrate development.