The modifier of mdg4, mod(mdg4), locus in Drosophila melanogaster represents a new type of complex gene in which functional diversity is resolved by mRNA trans-splicing. A protein family of >30 transcriptional regulators, which are supposed to be involved in higher-order chromatin structure, is encoded by both DNA strands of this locus. Mutations in mod(mdg4) have been identified independently in a number of genetic screens involving position-effect variegation, modulation of chromatin insulators, apoptosis, pathfinding of nerve cells, and chromosome pairing, indicating pleiotropic effects. The unusual gene structure and mRNA trans-splicing are evolutionary conserved in the distantly related species Drosophila virilis. Chimeric mod(mdg4) transcripts encoded from nonhomologous chromosomes containing the splice donor from D. virilis and the acceptor from D. melanogaster are produced in transgenic flies. We demonstrate that a significant amount of protein can be produced from these chimeric mRNAs. The evolutionary and functional conservation of mod(mdg4) and mRNA trans-splicing in both Drosophila species is furthermore demonstrated by the ability of D. virilis mod(mdg4) transgenes to rescue recessive lethality of mod(mdg4) mutant alleles in D. melanogaster.