The Drosophila Vestigial protein has been shown to play an essential role in the regulation of cell proliferation and differentiation within the developing wing imaginal disc. Cell-specific expression of vg is controlled by two separate transcriptional enhancers. The boundary enhancer controls expression in cells near the dorsoventral (DV) boundary and is regulated by the Notch signal transduction pathway, while the quadrant enhancer responds to the Decapentaplegic and Wingless morphogen gradients emanating from cells near the anteroposterior (AP) and DV boundaries, respectively. MAD-dependent activation of the vestigial quadrant enhancer results in broad expression throughout the wing pouch but is excluded from cells near the DV boundary. This has previously been thought to be due to direct repression by a signal from the DV boundary; however, we show that this exclusion of quadrant enhancer-dependent expression from the DV boundary is due to the absence of an additional essential activator in those cells. The Drosophila POU domain transcriptional regulator, Drifter, is expressed in all cells within the wing pouch expressing a vgQ-lacZ transgene and is also excluded from the DV boundary. Viable drifter hypomorphic mutations cause defects in cell proliferation and wing vein patterning correlated with decreased quadrant enhancer-dependent expression. Drifter misexpression at the DV boundary using the GAL4/UAS system causes ectopic outgrowths at the distal wing tip due to induction of aberrant Vestigial expression, while a dominant-negative Drifter isoform represses expression of vgQ-lacZ and causes severe notching of the adult wing. In addition, we have identified an essential evolutionarily conserved sequence element bound by the Drifter protein with high affinity and located adjacent to the MAD binding site within the quadrant enhancer. Our results demonstrate that Drifter functions along with MAD as a direct activator of Vestigial expression in the wing pouch.