ABSTRACT In the developing eye of Drosophila cell fate is controlled by a cascade of inductive interactions. Little is known about how the specificity of positional signalling is achieved such that directly adjacent progenitor cells reproducibly choose distinct developmental pathways. The determination of the R7 photoreceptor in each ommatidium depends on the presence of the sevenless protein which acts as a receptor for positional information on the R7 precursor. The rough gene encodes a homeodomain protein that plays an instructive role in the determination of the R3 and R4 photoreceptor cells. The use of ectopic expression of sevenless and rough has provided insight into the mechanisms of positional signalling and the normal function of rough. Ubiquitous expression of sevenless does not alter cell fate suggesting that the inducing signal is both spatially and temporally controlled. Conversely, ectopic expression of rough in the R7 precursor causes a transformation of R7 cells into Rl-6 type cells. This indicates that rough acts, similar to other homeobox genes, as a selector gene that determines the fate of single cells.