ABSTRACT The dorsoventral midline of the Drosophila eye disc is a source of signals that stimulate growth of the eye disc, define the point at which differentiation initiates, and direct ommatidial rotation in opposite directions in the two halves of the eye disc. This boundary region seems to be established by the genes of the iroquois complex, which are expressed in the dorsal half of the disc and inhibit fringe expression there. Fringe controls the activation of Notch and the expression of its ligands, with the result that Notch is activated only at the fringe expression boundary at the midline. The secreted protein Wingless activates the dorsal expression of the iroquois genes. We show here that pannier, which encodes a GATA family transcription factor expressed at the dorsal margin of the eye disc from embryonic stages on, acts upstream of wingless to control mirror and fringe expression and establish the dorsoventral boundary. Loss of pannier function leads to the formation of an ectopic eye field and the reorganization of ommatidial polarity, and ubiquitous pannier expression can abolish the eye field. Pannier is thus the most upstream element yet described in dorsoventral patterning of the eye disc.