The Drosophila selector gene cut is a hierarchal regulator of external sensory organ identity and is required to pattern the sensory and nonsensory cells of the wing margin. Cut performs the latter function, in part, by maintaining expression of the secreted morphogen encoded by wingless (wg). We find that Cut is required for wing-margin sensory organ specification in addition to and independently of Wg maintenance. In addition, we performed a genetic modifier screen to identify other genes that interact with cut in the regulation of wing-margin patterning. In total, 45 genetic loci (35 gain-of-function and 10 loss-of-function loci) were identified by virtue of their ability to suppress the wing-margin defects resulting from gypsy retrotransposon-mediated insulation of the cut wing-margin enhancer. Further genetic characterization identified several subgroups of candidate cut interacting loci. One group consists of putative regulators of gypsy insulator activity. A second group is potentially required for the regulation of Cut expression and/or activity and includes longitudinals lacking, a gene that encodes a family of BTB-domain zinc-finger transcription factors. A third group, which includes a component of the Brahma chromatin remodeling complex encoded by moira, affects the level of Cut expression in two opposing ways by suppressing the gypsy-mediated ct(K) phenotype and enhancing the non-gypsy ct(53d) phenotype. This suggests that the Brahma complex modulates both enhancer-controlled transcription and gypsy-mediated gene insulation of the cut locus.