In addition to their role in the specification of the epidermal pattern in each segment, several segment polarity genes, including gooseberry (gsb), specify cell fate in the Drosophila central nervous system (CNS). Analyses of the gsb CNS phenotype have been complicated by the fact that the previously available gsb mutants, all caused by cytologically visible deficiencies, have severe segmentation defects and also lack a number of additional genes. We have characterized two novel gsb mutants which, due to their hypomorphic nature, have CNS defects, but have only weak or no segmentation defects. These gsb alleles, as well as gsb rescue experiments, have allowed us to determine which aspects of the deficiency mutant phenotypes can be attributed to loss of gsb. gsb mutants lack U and CQ neurons, have duplicated RP2 neurons, and display posterior commissure defects. gsb neural defects, as well as the gsb cuticle defect, are differentially sensitive to the level of functional Gsb. We have used one of the novel gsb alleles in order to understand the genetic interactions between gsb, wingless (wg), and patched (ptc) during the patterning of the ventral neuroectoderm. In contrast to epidermal patterning, where Gsb is required to maintain wg transcription, we find that Gsb antagonizes the Wg signal that confers neuroblast (NB) 4-2 fate.