The reversible phosphorylation-dephosphorylation of RNA polymerase II (Pol II) large subunit carboxyl terminal domain (CTD) during transcription cycles in eukaryotic cells generates signals for the steps of RNA synthesis and maturation. The major phosphatase specific for CTD dephosphorylation from yeast to mammals is the TFIIF-interacting CTD-phosphatase, Fcp1. We report here on the in vivo analysis of Fcp1 function in Drosophila using transgenic lines in which the phosphatase production is misregulated. Fcp1 function is essential throughout Drosophila development and ectopic up- or downregulation of fcp1 results in lethality. The fly Fcp1 binds to specific regions of the polytene chromosomes at many sites colocalized with Pol II. In accord with the strong evolutional conservation of Fcp1: (1) the Xenopus fcp1 can substitute the fly fcp1 function, (2) similarly to its S. pombe homologue, Drosophila melanogaster (Dm)Fcp1 interacts with the RPB4 subunit of Pol II, and (3) transient expression of DmFcp1 has a negative effect on transcription in mammalian cells. The in vivo experimental system described here suggests that fly Fcp1 is associated with the transcription engaged Pol II and offers versatile possibilities for studying this evolutionary conserved essential enzyme.