Sex chromosomes have long posed a fascinating puzzle for biologists. The X and the Y chromosome have originated from a pair of identical chromosomes independently in many species and have evolved under different selective pressures. The result in many organisms is a male-specific Y chromosome that has lost most of its original genes, and a difference in the number of X-chromosomes in males (XY) and females (XX). Dosage compensation is the process by which the expression of X-linked genes is altered in one sex to counterbalance this difference in X-chromosome number between males and females of a heterogametic (i.e. XX and XY) species. Dramatically different dosage compensation mechanisms have evolved in different organisms with male Drosophila increasing the transcription of their single X approximately twofold. How dosage compensation evolved and its link to the formation of heteromorphic sex chromosomes is unclear. We are taking advantage of this evolutionary interplay between degeneration of the Y and dosage compensation of the X on newly evolving sex chromosomes (called neo-sex chromosomes) in Drosophila miranda, to study the acquisition of dosage compensation 'in action' using both comparative and functional genomics approaches. I will present data on comparative sequence analysis combined with expression profiles of neo-sex linked genes to link molecular changes occurring on the neo-sex chromosomes to changes in gene expression. This allows us to distinguish whether dosage compensation evolves on a gene-by-gene basis - in response to the formation of a degenerate copy on the Y chromosome - or whether dosage compensation evolves in large blocks along the X chromosome, involving several genes at a time. I also present preliminary data on our attempt to map de novo cis-acting binding sites on the neo-X chromosome that recruit the dosage compensation machinery, and test whether they were incorporated by positive selection. Integrating these different approaches will constitute significant progress in our understanding of the mechanism of dosage compensation in Drosophila and how it evolves.