To understand the roles of secretory peptides in developmental signaling, we have studied Drosophila mutant for the gene peptidylglycine alpha-hydroxylating monooxygenase (PHM). PHM is the rate-limiting enzyme for C-terminal alpha-amidation, a specific and necessary modification of secretory peptides. In insects, more than 90% of known or predicted neuropeptides are amidated. PHM mutants lack PHM protein and enzyme activity; most null animals die as late embryos with few morphological defects. Natural and synthetic PHM hypomorphs revealed phenotypes that resembled those of animals with mutations in genes of the ecdysone-inducible regulatory circuit. Animals bearing a strong hypomorphic allele contain no detectable PHM enzymatic activity or protein; approximately 50% hatch and initially display normal behavior, then die as young larvae, often while attempting to molt. PHM mutants were rescued with daily induction of a PHM transgene and complete rescue was seen with induction limited to the first 4 days after egg-laying. The rescued mutant adults produced progeny which survived to various stages up through metamorphosis (synthetic hypomorphs) and displayed prepupal and pupal phenotypes resembling those of ecdysone-response gene mutations. Examination of neuropeptide biosynthesis in PHM mutants revealed specific disruptions: Amidated peptides were largely absent in strong hypomorphs, but peptide precursors, a nonamidated neuropeptide, nonpeptide transmitters, and other peptide biosynthetic enzymes were readily detected. Mutant adults that were produced by a minimal rescue schedule had lowered PHM enzyme levels and reproducibly altered patterns of amidated neuropeptides in the CNS. These deficits were partially reversed within 24 h by a single PHM induction in the adult stage. These genetic results support the hypothesis that secretory peptide signaling is critical for transitions between developmental stages, without strongly affecting morphogenetic events within a stage. Further, they show that PHM is required for peptide alpha-amidating activity throughout the life of Drosophila. Finally, they define novel methods to study neural and endocrine peptide biosynthesis and functions in vivo. Copyright 2000 Academic Press.