Cleavage of the Drosophila screw prodomain is critical for a dynamic BMP morphogen gradient in embryogenesis

•scwE1 Allele contains a mutation at the furin cleavage site within the prodomain.•ScwE1 preferentially forms a heterodimer with Dpp.•Dpp:Scw heterodimer signaling requires cleavage at the E1 prodomain cleavage site.•Post-translational regulation of Scw modulates Dpp signaling.

Dorsoventral patterning of the Drosophila embryo is regulated by graded distribution of bone morphogenetic proteins (BMPs) composed of two ligands, decapentaplegic (Dpp) a BMP2/4 ortholog and screw (Scw) a BMP5/6/7/8 family member. scwE1 encodes an unusual allele that was isolated as a dominant enhancer of partial loss-of-function mutations in dpp. However, the molecular mechanisms that underlie this genetic interaction remain to be addressed. Here we show that scwE1 contains a mutation at the furin cleavage site within the prodomain that is crucial for ligand production. Furthermore, our data show that ScwE1 preferentially forms heterodimers with Dpp rather than homotypic dimers, providing a possible explanation for the dominant negative phenotype of scwE1 alleles. The unprocessed prodomain of ScwE1 remains in a complex with the Dpp:Scw heterodimer, and thus could interfere with interaction of the ligand with the extracellular matrix, or the kinetics of processing/secretion of the ligand in vivo. These data reveal novel mechanisms by which post-translational regulation of Scw can modulate Dpp signaling activity.