Organisms from humans to Drosophila have been found to contain cellular sequences and transcripts that are homologous to viral- onc genes. The normal function of the genes encoded for by these cellular sequences is unknown. Only by understanding the normal function of these cellular genes (c-onc) will we have a possible means to understand how they can become transforming upon transduction by the virus. With this goal in mind, this study using Drosophila was begun. Cellular sequences homologous to the ets region of the chicken retrovirus, E-26, have been found in Drosophila in this laboratory. The characterized portion of this gene corresponds to the last two eons of the chicken c-ets-1 gene, and has over 90% homology at the predicted amino acid level. It is designated D-ets-2 and is localized on chromosome 3R at position 58 A/B, and it produces a single transcript of 4.7 Kb in all developmental stages. Low stringency hybridization of Drosophila genomic DNA shows several other bands that also hybridize with a viral ets probe, E1.28. Hybridization of a cDNA library under these conditions led to the isolation of a cDNA clone which shows considerable homology to v- ets but is not D-ets-2. This gene, called D-elg for Drosophila ets-like gene, has approximately 60% homology with D-ets-2 and is located on chromosome 3R at 97D. It produces two transcripts of 2.3 and 2.0 Kb in embryo, pupae, and adult stages. Drosophila appears to have conserved the 3' region of the ets gene very well in at least two different genes, and now it is hoped that Drosophila will provide a system to determine the function of these genes.