We have previously cloned lethal(2)giant larvae, a tumor-suppressor gene of Drosophila that normally controls cell proliferation and/or differentiation in the optic centers of the brain and the imaginal discs. Here we describe the structure of the l(2)gl genes as determined by sequencing genomic and cDNA clones. The structure of the cDNAs indicates the use of alternative splicing, either in the 5' untranslated exons or in the 3' coding exons. Thus the gene encodes two putative proteins of 1161 and 708 amino acids, p127 and p78, respectively, differing at their C termini. A 3'-truncated l(2)gl transposon that leaves the coding sequence of p78 intact but deletes 141 residues of p127 was capable of suppressing tumor formation in l(2)gl-deficient animals. These results suggest that the putative p78 protein is effective in controlling cell proliferation and/or differentiation.