During gene activation, the effect of binding of transcription factors to cis-acting DNA sequences is transmitted to RNA polymerase by means of co-activators. Although co-activators contribute to the efficiency of transcription, their developmental roles are poorly understood. We used Drosophila to conduct molecular and genetic dissection of an evolutionarily conserved but unique co-activator, Multiprotein Bridging Factor 1 (MBF1), in a multicellular organism. Through immunoprecipitation, MBF1 was found to form a ternary complex including MBF1, TATA-binding protein (TBP) and the bZIP protein Tracheae Defective (TDF)/Apontic. We have isolated a Drosophila mutant that lacks the mbf1 gene in which no stable association between TBP and TDF is detectable, and transcription of a TDF-dependent reporter gene is reduced by 80%. Although the null mutants of mbf1 are viable, tdf becomes haploinsufficient in mbf1-deficient background, causing severe lesions in tracheae and the central nervous system, similar to those resulting from a complete loss of tdf function. These data demonstrate a crucial role of MBF1 in the development of tracheae and central nervous system.