Group III hybrid histidine kinases (HHK3) are known molecular targets of the widely used fungicidal agent fludioxonil which indirectly converts these kinases to a phosphatase form that causes constitutive activation of Hog1 MAPK. To better understand the fungicidal effect of fludioxonil we have screened S. cerevisiae haploid deletion collection for fludioxonil resistant mutant and identified Ssd1 as a critical factor for this. Deletion of SSD1 not only promoted resistance to fludioxonil but also abrogated Hog1 activation and other cellular damages caused by fludioxonil. Our results showed that fludioxonil perturbed the localization of Cbk1 kinase, an essential protein in yeast, at the bud neck triggering the accumulation of Ssd1 in P-bodies. As a result, localized synthesis of Ssd1 bound mRNA encoding cell wall proteins at the polarized growth site was impaired which created a sustained cell wall stress causing constitutive activation of Hog1. Our data, for the first time, clearly indicated the role of Cbk1 upstream of Hog1 and provided a novel paradigm in the mechanism of action of fludioxonil.