Cytoplasmic incompatibility (CI) induced by the endosymbiont Wolbachia pipientis causes complex patterns of crossing sterility between populations of the Culex pipiens group of mosquitoes. The molecular basis of the phenotype is yet to be defined. In order to investigate what host changes may underlie CI at the molecular level, we examined the transcription of a homolog of the Drosophila melanogaster gene grauzone that encodes a zinc finger protein and acts as a regulator of female meiosis, in which mutations can cause sterility. Upregulation was observed in Wolbachia-infected C. pipiens group individuals relative to Wolbachia-cured lines and the level of upregulation differed between lines that were reproductively incompatible. Knockdown analysis of this gene using RNAi showed an effect on hatch rates in a Wolbachia infected Culex molestus line. Furthermore, in later stages of development an effect on developmental progression in CI embryos occurs in bidirectionally incompatible crosses. The genome of a wPip Wolbachia strain variant from Culex molestus was sequenced and compared with the genome of a wPip variant with which it was incompatible. Three genes in inserted or deleted regions were newly identified in the C. molestus wPip genome, one of which is a transcriptional regulator labelled wtrM. When this gene was transfected into adult Culex mosquitoes, upregulation of the grauzone homolog was observed. These data suggest that Wolbachia-mediated regulation of host gene expression is a component of the mechanism of cytoplasmic incompatibility.