echinoid (ed) encodes an cell-adhesion molecule (CAM) that contains immunoglobulin domains and regulates the EGFR signaling pathway during Drosophila eye development. Based on our previous genetic mosaic and epistatic analysis, we proposed that Ed, via homotypic interactions, activates a novel, as yet unknown pathway that antagonizes EGFR signaling. In this report, we demonstrate that Ed functions as a homophilic adhesion molecule and also engages in a heterophilic trans-interaction with Drosophila Neuroglian (Nrg), an L1-type CAM. Co-expression of ed and nrg in the eye exhibits a strong genetic synergy in inhibiting EGFR signaling. This synergistic effect requires the intracellular domain of Ed, but not that of Nrg. In addition, Ed and Nrg colocalize in the Drosophila eye and are efficiently co-immunoprecipitated. Together, our results suggest a model in which Nrg acts as a heterophilic ligand and activator of Ed, which in turn antagonizes EGFR signaling.