In Drosophila, wings and halteres are the dorsal appendages of the second and third thoracic segments, respectively. In the third thoracic segment, homeotic selector gene Ultrabithorax (Ubx) suppresses wing development to mediate haltere development (E.B. Lewis, 1978. A gene complex controlling segmentation in Drosophila. Nature 276, 565-570). Halteres lack stout sensory bristles of the wing margin and veins that reticulate the wing blade. Furthermore, wing and haltere epithelia differ in the size, shape, spacing and number of cuticular hairs. The differential development of wing and haltere, thus, constitutes a good genetic system to study cell fate determination. Here, we report that down-regulation of Egfr/Ras pathway is critical for haltere fate specification: over-expression of positive components of this pathway causes significant haltere-to-wing transformations. RNA in situ, immunohistochemistry, and epistasis genetic experiments suggest that Ubx negatively regulates the expression of the ligand vein as well as the receptor Egf-r to down-regulate the signaling pathway. Electromobility shift assays further suggest that Egf-r is a potential direct target of Ubx. These results and other recent findings suggest that homeotic genes may regulate cell fate determination by directly regulating few steps at the top of the hierarchy of selected signal transduction pathways.