The Raf family of serine/threonine kinases are essential components in many receptor tyrosine kinase-mediated signal transduction pathways. Here, we analyze the function of D-raf in the Torso (Tor) pathway required to specify cellular fates at the embryonic poles. Using mutant embryos lacking endogenous D-raf protein, we show that D-raf's serine/threonine kinase activity is essential for its role in Tor signal transduction and that human Raf-l will substitute for D-raf in this pathway. After Tor activation, D-raf becomes hyperphosphorylated. We identified two putative serine phosphorylation sites (S388 and S743) in SF9 cells and demonstrate that S743 or its phosphorylation is essential for D-raf function in embryos. Alanine substitution at S388, N-terminal truncation, or targeted membrane association permits transmission of the Torso signal by D-raf, but these D-raf molecules differ in their rescuing potential and relative biological activity. Membrane-targeted D-raf(tor4021) showed the highest level of activity, followed by alanine-substituted D-raf(S388A) and N-terminal-truncated D-raf(Delta 445). Since the activity profiles for these altered forms of D-raf are distinct, these findings indicate that each structural modification differentially affects the regulation and/or propagation of the Tor signal by these mutant D-raf proteins. (C) 1996 Academic Press, Inc.