A novel developmental gene, yelA, has been found that plays as essential role in regulating terminal differentiation of Dictyostelium discoideum. Strains in which yelA is disrupted by plasmid insertion are arrested at the tight mound stage but accumulate the bright yellow pigment characteristic of mature sori. Although these mutant strains do not form fruiting bodies, many of the cells encapsulate within the mounds. Sporulation occurs about 6 hours earlier in yelA- cells than in wild-type cells, accompanied by precocious expression of a prespore gene, spiA. However, the spores are defective and lose viability over a period of several hours. Unencapsulated cells also die unless they are dissociated from the mounds and shaken in suspension. The yelA gene was isolated by plasmid rescue and found to encode a protein of 102 kDa in which the N-terminal sequence shows significant similarity to domains found in the eIF-4G subunits of the translational initiation complex eIF-4F. In wild-type cells yelA mRNA first accumulates at 8 hours of development and is maintained in both prespore and prestalk cells until culmination when it is found only is stalk cells. Mutations in yelA can partially suppress the block to sporulation in mutant strains in which either of the prestalk genes tagB or tagC is disrupted such that an encapsulation signal is not produced. It appears that premature encapsulation is normally inhibited by YelA until a signal is received from prestalk cells during culmination.