The dorsoventral axis of the Drosophila visual cortex is patterned by nonautonomous signals expressed at its dorsal and ventral margins. wingless (wg) expression at the margins induces decapentaplegic (dpp), optomotor blind (omb), and aristaless in adjacent domains. We show that Combgap, a zinc finger protein, represses Wg target gene expression in the visual cortex. Wg signal reception downregulates combgap expression and derepresses target gene transcription. Combgap participates in a Hedgehog-controlled circuit in the developing wing and leg by regulating the expression of Cubitus interruptus. Combgap is thus a tissue-specific relay between Wingless and its target genes for the determination of cell fate in the visual cortex.