Dally regulates Dpp morphogen gradient formation by stabilizing Dpp on the cell surface.

Decapentaplegic (Dpp), a Drosophila homologue of bone morphogenetic proteins, acts as a morphogen to regulate patterning along the anterior-posterior axis of the developing wing. Previous studies showed that Dally, a heparan sulfate proteoglycan, regulates both the distribution of Dpp morphogen and cellular responses to Dpp. However, the molecular mechanism by which Dally affects the Dpp morphogen gradient remains to be elucidated. Here, we characterized activity, stability, and gradient formation of a truncated form of Dpp (Dpp(Delta N)), which lacks a short domain at the N-terminus essential for its interaction with Dally. Dpp(Delta N) shows the same signaling activity and protein stability as wild-type Dpp in vitro but has a shorter half-life in vivo, suggesting that Dally stabilizes Dpp in the extracellular matrix. Furthermore, genetic interaction experiments revealed that Dally antagonizes the effect of Thickveins (Tkv; a Dpp type I receptor) on Dpp signaling. Given that Tkv can downregulate Dpp signaling by receptor-mediated endocytosis of Dpp, the ability of dally to antagonize tkv suggests that Dally inhibits this process. Based on these observations, we propose a model in which Dally regulates Dpp distribution and signaling by disrupting receptor-mediated internalization and degradation of the Dpp-receptor complex.

Expression of a secreted form of Dally, a Drosophila glypican, induces overgrowth phenotype by affecting action range of Hedgehog.

Glypicans, a family of heparan sulfate proteoglycans attached to the cell surface via a glycosylphosphatidylinositol (GPI)-anchor, play essential roles in morphogen signaling and distributions. A Drosophila glypican, Dally, regulates the gradient formation of Decapentaplegic (Dpp) in the developing wing. To gain insights into the function of glypicans in morphogen signaling, we examined the activities of two mutant forms of Dally: a transmembrane form (TM-Dally) and a secreted form (Sec-Dally). Misexpression of tm-dally in the wing disc had a similar yet weaker effect in enhancing Dpp signaling compared to that of wild-type dally. In contrast, Sec-Dally shows a weak dominant negative activity on Dpp signal transduction. Furthermore, sec-dally expression led to patterning defects as well as a substantial overgrowth of tissues and animals through the expansion of the action range of Hh. These findings support the recently proposed model that secreted glypicans have opposing and/or distinct effects on morphogen signaling from the membrane-tethered forms.