Drosophila wingless encodes a Wnt protein which mediates communication between cells. Although wingless protein is secreted from cells, there is debate as to what is the range of wingless action. We examined the function of wingless in the larval midgut, and found that wingless acts at two different thresholds to pattern this tissue. Low wingless levels are required to promote the development of copper cells, highly differentiated midgut cells of the larval midgut that are specified by the homeotic gene labial. High wingless levels repress copper cell development and allow differentiation of an alternative cell type, called large flat cells. These two developmental outcomes reflect labial expression, which is stimulated at low levels and repressed at high levels of wingless signalling. Thus, midgut cells respond differentially to distinct wingless thresholds in terms of both gene control and cellular differentiation.