The homeobox gene orthodenticle (otd) controls the process of regional specification that takes place in the Drosophila eye-antennal disc during ocelli development. Mutations that reduce or abolish otd expression in the ocelli primordium give rise to ocelliless flies. We have identified the cis-regulatory sequence (ocelliless enhancer) that controls otd expression during ocelli development and studied its regulation at the molecular level. The ocelliless enhancer is initially activated by the combined action of Wingless (Wg) and Hedgehog (Hh) signaling pathways. Later, a positive autoregulatory feedback loop sets in to maintain otd expression. Moreover, we have analyzed the role of otd during ocelli primordium development and determined its involvement in the expression of the retinal determination gene eyes absent (eya). otd indirectly regulates eya in ocellar precursor cells through the inhibition of wg, an eya repressor, and the maintenance of hh expression in the ocelli primordium. Hh signaling is necessary for eya activation in ocellar precursor cells and this activation is mediated by the full-length activator form of the transcription factor Cubitus interruptus.