Spatially regulated activation of the Drosophila epidermal growth factor (EGF) receptor by its ligand, Gurken, is required for establishment of the dorsal/ventral axis of the oocyte and embryo. During mid-oogenesis, Gurken is concentrated at the dorsal-anterior of the oocyte and is thought to activate the EGF receptor pathway in adjacent follicle cells. In response to this signal, dorsal follicle cell fate is determined. These cells further differentiate into either appendage-producing or midline cells, resulting in patterning in the dorsal follicle cell layer. We show here that Pointed, an ETS transcription factor, is required in dorsal follicle cells for this patterning. Loss of pointed results in the loss of midline cells and an excess of appendage-forming cells, a phenotype associated with overactivation of the EGF receptor pathway in the dorsal region. Overexpression of pointed leads to a phenotype similar to that generated by loss of the EGF receptor pathway. This suggests that Pointed normally down-regulates EGF receptor signaling in the midline to generate patterning in the dorsal region. Interestingly, pointed expression is induced by the EGF receptor pathway. These data indicate a novel antagonistic function for Pointed in oogenesis; in response to activation of the EGF receptor, pointed is expressed and negatively regulates the EGF receptor pathway, possibly by integrating information from a second pathway.