The Wingless (Wg)/Wnt signal transduction pathway directs a variety of cell fate decisions in developing animal embryos. Despite the identification of many Wg pathway components to date, it is still not clear how these elements work together to generate cellular identities. In the ventral epidermis of Drosophila embryos, Wg specifies cells to secrete a characteristic pattern of denticles and naked cuticle that decorate the larval cuticle at the end of embryonic development. We have used the Drosophila ventral epidermis as our assay system in a series of genetic screens to identify new components involved in Wg signaling. Two mutant lines that modify wg-mediated epidermal patterning represent the first loss-of-function mutations in the RacGap50C gene. These mutations on their own cause increased stabilization of Armadillo and cuticle pattern disruptions that include replacement of ventral denticles with naked cuticle, which suggests that the mutant embryos suffer from ectopic Wg pathway activation. In addition, RacGap50C mutations interact genetically with naked cuticle and Axin, known negative regulators of the Wg pathway. These phenotypes suggest that the RacGap50C gene product participates in the negative regulation of Wg pathway activity.