Seven zygotically active genes are required for normal patterning of the dorsal 40% of the Drosophila embryo. Among these genes, decapentaplegic (dpp) has the strongest mutant phenotype: in the absence of dpp, all cells in the dorsal and dorsolateral regions of the embryo adopt fates characteristic of more ventrally derived cells (Irish and Gelbart (1987) Genes Dev. 1, 868-879). Here we describe the phenotypes caused by alleles of another of this set of genes, tolloid, and show that tolloid is required for dorsal, but not dorsolateral, pattern. Extragenic suppressors of tolloid mutations were isolated that proved to be mutations that elevate dpp activity. We studied the relationship between tolloid and dpp by analyzing the phenotypes of tolloid embryos with elevated numbers of the dpp gene and found that doubling the dpp+ gene dosage completely suppressed weak tolloid mutants and partially suppressed the phenotypes of tolloid null mutants. We conclude that the function of tolloid is to increase dpp activity. We also examined the effect of doubling dpp+ gene dosage on the phenotypes caused by other mutations affecting dorsal development. Like tolloid, the phenotypes of mutant embryos lacking shrew gene function were suppressed by elevated dpp, indicating that shrew also acts upstream of dpp to increase dpp activity. In contrast, increasing the number of copies of the dpp gene enhanced the short gastrulation (sog) mutant phenotype, causing ventrolateral cells to adopt dorsal fates. This indicates that sog gene product normally blocks dpp activity ventrally. We propose that the tolloid, shrew and sog genes are required to generate a gradient of dpp activity, which directly specifies the pattern of the dorsal 40% of the embryo.