Friend of GATA (FOG) proteins regulate GATA factor-activated gene transcription. During vertebrate hematopoiesis, FOG and GATA proteins cooperate to promote erythrocyte and megakaryocyte differentiation. The Drosophila FOG homologue U-shaped (Ush) is expressed similarly in the blood cell anlage during embryogenesis. During hematopoiesis, the acute myeloid leukemia 1 homologue Lozenge and Glial cells missing are required for the production of crystal cells and plasmatocytes, respectively. However, additional factors have been predicted to control crystal cell proliferation. In this report, we show that Ush is expressed in hemocyte precursors and plasmatocytes throughout embryogenesis and larval development, and the GATA factor Serpent is essential for Ush embryonic expression. Furthermore, loss of ush function results in an overproduction of crystal cells, whereas forced expression of Ush reduces this cell population. Murine FOG-1 and FOG-2 also can repress crystal cell production, but a mutant version of FOG-2 lacking a conserved motif that binds the corepressor C-terminal binding protein fails to affect the cell lineage. The GATA factor Pannier (Pnr) is required for eye and heart development in Drosophila. When Ush, FOG-1, FOG-2, or mutant FOG-2 is coexpressed with Pnr during these developmental processes, severe eye and heart phenotypes result, consistent with a conserved negative regulation of Pnr function. These results indicate that the fly and mouse FOG proteins function similarly in three distinct cellular contexts in Drosophila, but may use different mechanisms to regulate genetic events in blood vs. cardial or eye cell lineages.