We have identified two genes associated with the hypodermal cell shape changes that occur during elongation of the Caenorhabditis elegans embryo. The first gene, called let-502, encodes a protein with high similarity to Rho-binding Ser/Thr kinases and to human myotonic dystrophy kinase (DM-kinase). Strong mutations in let-502 block embryonic elongation, and let-502 reporter constructs are expressed in hypodermal cells at the elongation stage of development. The second gene, mel-11, was identified by mutations that act as extragenic suppressors of let-502. mel-11 encodes a protein similar to the 110- to 133-kD regulatory subunits of vertebrate smooth muscle myosin-associated phosphatase (PP-1M). We suggest that the LET-502 kinase and the MEL-11 phosphatase subunit act in a pathway linking a signal generated by the small GTP-binding protein Rho to a myosin-based hypodermal contractile system that drives embryonic elongation. LET-502 may directly regulate the activity of the MEL-11 containing phosphatase complex and the similarity between LET-502 and DM-kinase suggests a similar function for DM-kinase.