GATA factors play an essential role in endodermal specification in both protostomes and deuterostomes. In Drosophila, the GATA factor gene serpent (srp) is critical for differentiation of the endoderm. However, the expression of srp disappears around stage 11, which is much earlier than overt differentiation occurs in the midgut, an entirely endodermal organ. We have identified another endoderm-specific Drosophila GATA factor gene, dGATAe. Expression of dGATAe is first detected at stage 8 in the endoderm, and its expression continues in the endodermal midgut throughout the life cycle. srp is required for expression of dGATAe, and misexpression of srp resulted in ectopic dGATAe expression. Embryos that either lacked dGATAe or were injected with double-stranded RNA (dsRNA) corresponding to dGATAe failed to express marker genes that are characteristic of differentiated midgut. Conversely, overexpression of dGATAe induced ectopic expression of endodermal markers even in the absence of srp activity. Transfection of the dGATAe cDNA also induced endodermal markers in Drosophila S2 cells. These studies provide an outline of the genetic pathway that establishes the endoderm in Drosophila. This pathway is triggered by sequential signaling through the maternal torso gene, a terminal gap gene, huckebein (hkb), and finally, two GATA factor genes, srp and dGATAe.