The Wingless (Wg) protein is a secreted glycoprotein involved in intercellular signaling. On activation of the Wg signaling pathway, Armadillo is stabilized, causing target genes to be activated by the transcription factor Pangolin (Pan). This study investigated the roles of Pan in the developing wing of Drosophila by clonal analysis. Three different aspects of wing development were examined: cell proliferation, wing margin specification, and wg self-refinement. Our results indicate that Pan function is critically required for all three of these processes. Consequently, lack of pan causes a severe reduction in the activity of the Wg target genes Distalless and vestigial within their normal domain of expression. Loss of pan function does not, however, lead to a derepression of these genes outside this domain. Thus, although Pan is positively required for the induction of Wg targets in the wing imaginal disk, it does not appear to play a default repressor function in the absence of Wg input. In contrast, lack of zygotic pan function causes a milder phenotype than that caused by the lack of wg function in the embryo. We show that this difference cannot be attributed to maternally provided pan product, indicating that a Pan repressor function usually prevents the expression of embryonic Wg targets. Together, our results suggest that for embryonic patterning the activator as well as repressor forms of Pan play important roles, while for wing development Pan operates primarily in the activator mode.W ingless (Wg) plays important roles in Drosophila development. It is required for patterning of the embryonic epidermis (1, 2), for the proper establishment of the embryonic nervous system (3-6), and also for the specification, growth, and cell-fate assignment of adult appendages, such as the wing and the leg (7,8). In the developing wing imaginal disk, wg is first involved in the definition of the wing versus notum primordium (9, 10). Later, Wg is secreted at the dorsoventral (D͞V) compartment boundary of the wing disk, where it directs the formation of wing margin structures (11) and from where it acts as a morphogen to organize gene expression (12,13). Wg also plays a role in restricting its own expression to cells immediately adjacent to the D͞V boundary, a phenomenon referred to as wg self-refinement (14).Wg exerts most if not all effects on cell-fate specification by regulating the transcription of target genes in responding cells. The key regulatory event in the Wg transduction pathway appears to be the posttranscriptional up-regulation of the -catenin homolog Armadillo (Arm). Arm, in turn, confers transcriptional activator activity to the lymphoid-enhancing factor (LEF)͞T cell factor (TCF) homolog Pangolin (Pan)͞dTCF (15,16). LEF͞TCF proteins belong to the family of high-mobilitygroup transcription factors that bind to specific DNA sequences. Because the loss-of-pan-function phenotypes resemble those caused by loss of Wg signaling, it is likely that Pan acts as a transcriptional activator for Wg target genes. It w...