decapentaplegic (dpp) is a Transforming Growth Factor beta (TGF-beta)-related growth factor that controls multiple developmental processes in Drosophila. To identify components involved in dpp signaling, we carried out a genetic screen for dominant enhancer mutations of a hypomorphic allele of thick veins (tkv), a type I receptor for dpp. We recovered new alleles of tkv, punt, Mothers against dpp (Mad) and Medea (Med), all of which are known to mediate dpp signaling. We also recovered mutations in the 60A gene which encodes another TGF-beta-related factor in Drosophila. DNA sequence analysis established that all three 60A alleles were nonsense mutations in the prodomain of the 60A polypeptide. These mutations in 60A caused defects in midgut morphogenesis and fat body differentiation. We present evidence that when dpp signaling is compromised, lowering the level of 60A impairs several dpp-dependent developmental processes examined, including the patterning of the visceral mesoderm, the embryonic ectoderm and the imaginal discs. These results provide the first in vivo evidence for the involvement of 60A in the dpp pathway. We propose that 60A activity is required to maintain optimal signaling capacity of the dpp pathway, possibly by forming biologically active heterodimers with Dpp proteins.