Diacylglycerol kinase plays a central role in the metabolism of diacylglycerol by converting diacylglycerol into phosphatidic acid thus initiating resynthesis of phosphatidylinositols. Diacylglycerol is a known second messenger reversibly activating protein kinase C. In addition, diacylglycerol is a potential precursor for polyunsaturated fatty acids. We describe the identification and molecular analysis of a novel type III Drosophila diacylglycerol kinase isoform, DGKepsilon. Drosophila DGKepsilon is mapped to the cytological position 49C1-3. DGKepsilon mRNA is 1.9 kb in length and is broadly distributed throughout development in different cells, primordia and organs, including testes. In embryogenesis, the transcripts are enriched in the cells, which are in S-phase or undergoing endoreplication. Comparison of the Drosophila DGKepsilon with the human homologue revealed that the first zinc finger-like motif is specific for the type III isoform. Although the testis-specific diacylglycerol kinase activity is dependent upon the dose of DGKepsilon gene, the deletion of DGKepsilon does not modulate the total cellular diacylglycerol level. In spite of a proposed key role of diacylglycerol kinase in termination of the diacylglycerol signal, overexpression of a DGKepsilon transgene in flies under the control of a yeast upstream activating sequence promoter does not disrupt normal development in Drosophila.