The proneural genes achaete (ac) and scute (sc) are necessary for the formation of the external sensory organs (SOs) of Drosophila. ac and sc are expressed in proneural clusters and impart their cells with neural potential. For this potential to be realized, and the SO precursor cell (SOP) to arise within a cluster, sufficient proneural protein must accumulate in the cluster. Here we describe a novel gene, charlatan (chn), which encodes a zinc finger transcription factor that facilitates this accumulation by forming a stimulatory loop with ac/sc. We find that loss of function of chn decreases the accumulation of Sc in proneural clusters and partially removes notum macrochaetae, while overexpression of chn enhances ac/sc expression and the formation of extra SOs. Moreover, chn is activated by ac/sc in proneural clusters. Chn apparently stimulates ac/sc by physically interacting with the proneural cluster-specific enhancers and increasing enhancer efficiency, thus acting as a stimulator of ac/sc expression in proneural clusters. chn is also required for the proper development of the embryonic peripheral nervous system, as its absence leads to loss of neurons and causes aberrant development of chordotonal organs.