How cellular behaviors such as cell-to-cell communication, epithelial organization and cell shape reorganization are coordinated during development is poorly understood. The developing Drosophila eye offers an ideal model system to study these processes. Localized actin polymerization is required to constrict the apical surface of epithelial cells of the eye imaginal disc to maintain the refined arrangement of the developing ommatidia. The identity of each photoreceptor cell within the epithelium is determined by cell-to-cell contacts involving signal transduction events. The R7 photoreceptor cell requires the activity of the Sevenless RTK to adopt a proper cell fate. We performed an EP screen for negative regulators of this inductive process, and we identified the serine/threonine kinase Center divider (cdi) as a suppressor of the phenotype caused by an activated Sevenless receptor. Cdi is homologous to the human testis-specific kinase 1 (TESK1), a member of the LIM kinases involved in cytoskeleton control through ADF/cofilin phosphorylation. We have analyzed the effects of gain- and loss-of-function of cdi and found alterations in actin organization and in the adherens junctions proteins DE-cadherin and -catenin, as well as in Sevenless apical localization. Interference with the function of the ADF/cofilin phosphatase Slingshot (ssh), which antagonizes Cdi, also results in a suppression of signaling triggered by the Sevenless RTK. Our results reveal a critical interplay between the localization of molecules involved in epithelial organization and signal transduction. Key words: cdi, Sevenless, Photoreceptor, Eye, Actin