The Fused (Fu) serine–threonine kinase and the Suppressor of fused (Su(fu)) product are part of the Hedgehog (Hh) signalling pathway both in embryos and in imaginal discs. In wing imaginal discs, the Hh signal induces Cubitus interruptus (Ci) accumulation and activates patched (ptc) and decapentaplegic (dpp) expression along the anterior/posterior (A/P) boundary. In this paper, we have examined the role of the Fu and Su(fu) proteins in the regulation of Hh target gene expression in wing imaginal discs, by using different classes of fu alleles and an amorphic Su(fu) mutation. We show that, at the A/P boundary, Fu kinase activity is involved in the maintenance of high ptc expression and in the induction of late anterior engrailed (en) expression. These combined effects can account for the modulation of Ci accumulation and for the precise localization of the Dpp morphogen stripe. In contrast, in more anterior cells which do not receive Hh signal, we show that Fu plays a role independent of its kinase function in the regulation of Ci accumulation. In these cells, Fu may be involved in the stabilization of a large protein complex which is probably responsible for the regulation of Ci cleavage and/or targeting to nucleus. We propose that the Fused function is necessary for the activation of full-length Ci and counteracts the negative Su(fu) effect on the pathway, leading to en, ptc and dpp expression. î 1998 Elsevier Science Ireland Ltd. All rights reserved