The subdivision of the Drosophila wing imaginal disc into dorsoventral (DV) compartments and limb-body wall (wing-notum) primordia depends on Epidermal Growth Factor Receptor (EGFR) signaling, which heritably activates apterous (ap) in D compartment cells and maintains Iroquois Complex (Iro-C) gene expression in prospective notum cells. We examine the source, identity and mode of action of the EGFR ligand(s) that specify these subdivisions. Of the three known ligands for the Drosophila EGFR, only Vein (Vn), but not Spitz or Gurken, is required for wing disc development. We show that Vn activity is required specifically in the dorsoproximal region of the wing disc for ap and Iro-C gene expression. However, ectopic expression of Vn in other locations does not reorganize ap or Iro-C gene expression. Hence, Vn appears to play a permissive rather than an instructive role in organizing the DV and wing-notum segregations, implying the existance of other localized factors that control where Vn-EGFR signaling is effective. After ap is heritably activated, the level of EGFR activity declines in D compartment cells as they proliferate and move ventrally, away from the source of the instructive ligand. We present evidence that this reduction is necessary for D and V compartment cells to interact along the compartment boundary to induce signals, like Wingless (Wg), which organize the subsequent growth and differentiation of the wing primordium.