To form the proximal-distal axis of the C. elegans gonad, two somatic gonadal precursor cells, Z1 and Z4, divide asymmetrically to generate one daughter with a proximal fate and one with a distal fate. Genes governing this process include the lin-17 frizzled receptor, wrm-1/beta-catenin, the pop-1/TCF transcription factor, lit-1/nemo-like kinase, and the sys-1 gene. Normally, all of these regulators promote the distal fate. Here we show that nuclear levels of a pop-1 GFP fusion protein are less abundant in the distal than in the proximal Z1/Z4 daughters. This POP-1 asymmetry is lost in mutants disrupting Wnt/MAPK regulation, but retained in sys-1 mutants. We find that sys-1 is haplo-insufficient for gonadogenesis defects and that sys-1 and pop-1 mutants display a strong genetic interaction in double heterozygotes. Therefore, sys-1 is a dose-sensitive locus and may function together with pop-1 to control Z1/Z4 asymmetry. To identify other regulatory genes in this process, we screened for mutants resembling sys-1. Four such genes were identified (gon-14, -15, -16, and sys-3) and shown to interact genetically with sys-1. However, only sys-3 promotes the distal fate at the expense of the proximal fate. We suggest that sys-3 is a new key gene in this pathway and that gon-14, gon-15, and gon-16 may cooperate with POP-1 and SYS-1 at multiple stages of gonad development.