The genes decapentaplegic (dpp) and wingless (wg), which encode secreted factors of the TGF-beta and Wnt families, respectively, are required for the proper development of the imaginal discs. The expression of these genes must be finely regulated since their ectopic expression induces overgrowth and pattern alterations in wings and legs. Genes like patched (ptc) and costal-2 (cos-2), and the gene encoding the catalytic subunit of the protein kinase A gene (pkA) are required to restrict dpp and wg expression in their proper positions. We show here that some mutations in the cubitus interruptus (ci) gene also show ectopic dpp expression in the wing disc. We have also analyzed the functional hierarchy between these genes and the gene fused (fu), in the activation of dpp by the hedgehog (hh) signal. fu is required to transmit the hh signal in imaginal discs, since fu mutations rescue the phenotype due to the ectopic hh expression or to the lack of ptc activity. fu is also required for the activation of engrailed (en) caused when hh is ectopically activated in the wing disc. By contrast, fu mutations do not rescue the phenotypic consequences of the abnormal ci, cos-2 or pkA activity. Although fu, cos-2 and ci probably form part of the same pathway that controls dpp expression, pkA probably controls dpp transcription by a different pathway.