The presence of a single EGF receptor in Drosophila is contrasted by multiple ligands activating it. This work explores the role of two ligands, Spitz and Vein, in the embryonic ventral ectoderm. Spitz is a potent ligand, whereas Vein is an intrinsically weak activating ligand. We show that secreted Spitz emanating from the midline, triggers expression of vein in the ventral-most cell rows, by inducing expression of the ETS domain transcription factor Pointed P1. In the absence of Vein, lateral cell fates are not induced when Spitz levels are compromised. The positive feedback loop of Vein generates a robust mechanism for patterning the ventral ectoderm. Received September 28, 1998; revised version accepted November 18, 1998. The epidermal growth factor (EGF) receptor pathway in Drosophila (DER/EGFR) emerges as a highly pleiotropic signaling cascade, involved in many aspects of development (Perrimon and Perkins 1997;Schweitzer and Shilo 1997). This pathway utilizes a conserved signaling module in the different scenarios in which it functions. A very tight regulation of the pathway in time and space is essential. Whereas the receptor itself and the components downstream to it (e.g., the Ras/MAP kinase cascade) are expressed during development ubiquitously, intricate regulatory mechanisms have been uncovered at the level of the ligands.The presence of a single EGF receptor is contrasted by the multiplicity of activating ligands, which provide elaborate regulation of the pathway. One of the ligands, Gü rken, is utilized only during oogenesis. It encodes a TGF␣-like protein with a single EGF domain, a signal peptide, and a transmembrane domain. Gü rken localization is tightly regulated. This is achieved primarily by localization of the transcript to the vicinity of the oocyte nucleus (Neuman-Silberberg and Schü pbach 1993).Gü rken protein localization follows that of the mRNA (Neuman-Silberberg and Schü pbach 1996).A ligand that is used more broadly is Spitz. It too is similar in structure to TGF␣. In contrast to Gü rken, the Spitz precursor is expressed broadly (Rutledge et al. 1992). However, in its transmembrane form Spitz is inactive. Only the secreted, cleaved form of Spitz is active as an EGF receptor ligand (Schweitzer et al. 1995b;Freeman 1994). Processing of Spitz appears to be regulated by Rhomboid (Rho) and Star, two novel proteins containing multiple or a single transmembrane domains, respectively (Bier et al. 1990;Kolodkin et al. 1994). This is suggested by similarity of phenotypes, epistatic relationships and the nonautonomous activity of Rho and Star (Mayer and Nü sslein-Volhard 1988;Schweitzer et al. 1995b;Golembo et al. 1996a;Sapir et al. 1998).Finally, Vein represents another ligand of the EGF receptor. It is produced as a secreted ligand containing a single EGF module and an immunoglobulin domain. The presence of an immunoglobulin domain makes Vein more similar to Neuregulin, another vertebrate ligand of the EGF receptor family . In contrast to Spitz, which must be processed to an active liga...