Cell migration during embryonic tracheal system development in Drosophila requires DPP and EGF signaling to generate the archetypal branching pattern. We show that two genes encoding the transcription factors KNIRPS and KNIRPS RELATED possess multiple and redundant functions during tracheal development. knirps/knirps related activity is necessary to mediate DPP signaling which is required for tracheal cell migration and formation of the dorsal and ventral branches. Ectopic knirps or knirps related expression in lateral tracheal cells respecifies their anteroposterior to a dorsoventral migration behavior, similar to that observed in the case of ectopic DPP expression. In dorsal tracheal cells knirps/knirps related activity represses the transcription factor SPALT; this repression is essential for secondary and terminal branch formation. However, in cells of the dorsal trunk, spalt expression is required for normal anteroposterior cell migration and morphogenesis. spalt expression is maintained by the EGF receptor pathway and, hence, some of the opposing activities of the EGF and DPP signaling pathways are mediated by spalt and knirps/knirps related. Furthermore, we provide evidence that the border between cells acquiring dorsal branch and dorsal trunk identity is established by the direct interaction of KNIRPS with a spalt cis-regulatory element.