Scalloped (Sd) and Vestigial (Vg) are each needed for Drosophila wing development. We show that Sd is required for Vg function and that altering their relative cellular levels inhibits wing formation. In vitro, Vg binds directly to both Sd and its human homolog, Transcription Enhancer Factor-1. The interaction domains map to a small region of Vg that is essential for Vg-mediated gene activation and to the carboxy-terminal half of Sd. Our observations indicate that Vg and Sd function coordinately to control the expression of genes required for wing development, which implies that Vg is a tissue-specific transcriptional intermediary factor of Sd.