Suppression of wing fate and specification of haltere fate in Drosophila by the homeotic gene Ultrabithorax is a classical example of Hox regulation of serial homology (Lewis, E.B. 1978. Nature 276, 565-570) and has served as a paradigm for understanding homeotic gene function. We have used DNA microarray analyses to identify potential targets of Ultrabithorax function during haltere specification. Expression patterns of 18 validated target genes and functional analyses of a subset of these genes suggest that down-regulation of both anterior-posterior and dorso-ventral signaling is critical for haltere fate specification. This is further confirmed by the observation that combined over-expression of Decapentaplegic and Vestigial is sufficient to override the effect of Ubx and cause dramatic haltere-to-wing transformations. Our results also demonstrate that analysis of the differential development of wing and haltere is a good assay system to identify novel regulators of key signaling pathways.