The Drosophila argos gene encodes a secreted protein with an EGF motif which acts as an inhibitor of cellular differentiation in multiple developmental processes. To investigate the cellular pathways regulated by Argos, we screened for mutations which could modify the phenotype caused by overexpression of argos. We show that the effects of argos overexpression on the eye and wing vein development are suppressed by gain-of-function mutations of the MAPKK/D-MEK gene (Dsor1/D-mek) and the MAPK/ERK-A gene (rolled) and were enhanced by loss-of-function mutations of Star. Loss-of-function mutations in components of the Ras/MAPK signaling cascade act as dominant suppressors of the phenotype caused by the argos null mutations. A loss-of-function argos mutation enhanced the overproduction of R7 neurons caused by gain-of-function alleles of Son of sevenless and Dsor1. Conversely, overexpression of argos inhibited formation of the extra R7 cells that was caused by high-level MAPK/ERK-A activity. A phenotype of the sev; argos double mutants revealed that sev is epistatic to argos. These results provide evidence that Argos negatively regulates signal transduction events in the Ras/MAPK cascade.