In Drosophila melanogaster, Sex-lethal (Sxl) controls autoregulation and sexual differentiation by alternative splicing but regulates dosage compensation by translational repression. To elucidate how Sxl functions in splicing and translational regulation, we have ectopically expressed a full-length Sxl protein (Sx.FL) and a protein lacking the N-terminal 40 amino acids (Sx-N). The Sx.FL protein recapitulates the activity of Sxl gain-of-function mutations, as it is both sex transforming and lethal in males. In contrast, the Sx-N protein unlinks the sex-transforming and male-lethal effects of Sxl. The Sx-N proteins are compromised in splicing functions required for sexual differentiation, displaying only partial autoregulatory activity and almost no sex-transforming activity. On the other hand, the Sx-N protein does retain substantial dosage compensation function and kills males almost as effectively as the Sx.FL protein. In the course of our analysis of the Sx.FL and Sx-N transgenes, we have also uncovered a novel, negative autoregulatory activity, in which Sxl proteins bind to the 3' untranslated region of Sxl mRNAs and decrease Sxl protein expression. This negative autoregulatory activity may be a homeostasis mechanism.