We present the isolation and functional analysis of a transformer2 homologue Mdtra2 in the housefly Musca domestica. Compromising the activity of this gene by injecting dsRNA into embryos causes complete sex reversal of genotypically female individuals into fertile males, revealing an essential function of Mdtra2 in female development of the housefly. Mdtra2 is required for female-specific splicing of Musca doublesex (Mddsx) which structurally and functionally corresponds to Drosophila dsx, the bottom-most regulator in the sex-determining pathway. Since Mdtra2 is expressed in males and females, we propose that Mdtra2 serves as an essential co-factor of F, the key sex-determining switch upstream of Mddsx. We also provide evidence that Mdtra2 acts upstream as a positive regulator of F supporting genetic data which suggest that F relies on an autocatalytic activity to select and maintain the female path of development. We further show that repression of male courtship behavior by F requires Mdtra2. This function of F and Mdtra2 appears not to be mediated by Mddsx, suggesting that bifurcation of the pathway at this level is a conserved feature in the genetic architecture of Musca and Drosophila.