sdc-3 is an early-acting regulatory gene that controls both sex determination and X chromosome dosage compensation in C. elegans. It is unique among sdc genes in that its sex determination and dosage compensation functions act independently. The molecular analysis reported here demonstrates that separate domains of the Sdc-3 protein control these two developmental processes. Sequence analysis of 16 sdc-3 alleles reveals that the dosage compensation mutations specifically eliminate a pair of zinc finger motifs at the carboxyl terminus of Sdc-3, while the sex determination mutations after a region with limited homology to the ATP-binding domain of myosin. Null mutations, which disrupt both processes, abort translation of Sdc-3 prior to both domains. Analysis of site-directed changes confirms the functional significance of the two separate regions in sex determination and dosage compensation and reveals that an additional region, undetected by genetic analysis, is also required for proper dosage compensation.