Signaling by the Drosophila EGF receptor (DER) is modulated by four known EGF-like proteins: the agonists Vein (Vn), Spitz (Spi), and Gurken (Grk) and the antagonist Argos (Aos). DER is broadly expressed and thus tissue-specific regulation of ligand expression and activity is an important mechanism for controlling signaling. Here we investigate the tissue-specific regulation of Vn signaling by examining vn transcriptional control and Vn target gene activation in the embryo and the wing. The results show a complex temporal and spatial regulation of vn transcription involving multiple signaling pathways and tissue-specific activation of Vn target genes. In the embryo, vn is a target of Spi/DER signaling mediated by the ETS transcription factor PointedP1 (PntP1). This establishes a positive feedback loop in addition to the negative feedback loop involving Aos. The simultaneous production of Vn provides a mechanism for dampening Aos inhibition and thus fine-tunes signaling. In the larval wing pouch, vn is not a target of Spi/DER signaling but is expressed along the anterior-posterior boundary in response to Hedgehog (Hh) signaling. Repression by Wingless (Wg) signaling further refines the vn expression pattern by causing a discontinuity at the dorsal-ventral boundary. The potential for vn to activate DER target genes correlates with its roles in development: vn has a minor role in embryogenesis and does not induce DER target genes such as aos and pntP1 in the embryo. Conversely, vn has a major role in wing development and Vn/DER signaling is a potent inducer of DER target genes in the wing disc. Spi also has the potential to induce DER target genes in the wing disc. However, the ligands appear to evoke specific responses that result in different patterns of target gene expression. Finally, we show that other factors modulate the potential of Vn so that induction of Vn/DER target genes in the wing pouch is cell specific.