Localised transcription factors specify the identity of developmental domains. Here we analyse the function of the Teashirt zinc finger protein, which is expressed in the proximal domain of the Drosophila leg. By ectopic expression of a teashirt transgene we show that Teashirt contributes to the differences in cell-cell adhesion between proximal and distal leg cells. Whereas clones of cells expressing the teashirt transgene survive in the endogenous Teashirt domain, most cells expressing Teashirt in an ectopic distal position are lost from the epithelium. In clones which were recovered in the distal domain, different effects were seen dependent on position with respect to the dorsal-ventral axis. In the ventral region, where Wingless is signalling, surviving clones express Teashirt and cause abnormalities in the adult leg. Contrarily, lateral and dorsal clones generally do not accumulate Teashirt and have no effect on patterning. One exception to the differential dorsal-ventral effects occurs at the boundary between Teashirt-expressing and -nonexpressing cells. Both ectopic and hypomorphic loss of teashirt affects patterning at all positions at the boundary, suggesting that Teashirt plays a crucial role in boundary formation. The results are discussed with respect to the roles of transcriptional and posttranscriptional mechanisms in proximal-distal axis patterning of the Drosophila legs.