The eye/antennal discs of Drosophila form most of the adult head capsule. We are analyzing the role of the BMP family member decapentaplegic (dpp) in the process of head formation, as we have identified a class of cis-regulatory dpp mutations (dpp(s-hc)) that specifically disrupts expression in the lateral peripodial epithelium of eye/antennal discs and is required for ventral head formation. Here we describe the recovery of mutations in odd-paired (opa), a zinc finger transcription factor related to the vertebrate Zic family, as dominant enhancers of this dpp head mutation. A single loss-of-function opa allele in combination with a single copy of a dpp(s-hc) produces defects in the ventral adult head. Furthermore, postembryonic loss of opa expression alone causes head defects identical to loss of dpp(s-hc)/dpp(s-hc), and dpp(hc)/+;opa/+ mutant combinations. opa is required for dpp expression in the lateral peripodial epithelium, but not other areas of the eye/antennal disc. Thus a pathway that includes opa and dpp expression in the peripodial epithelium is crucial to the formation of the ventral adult head. Zic proteins and members of the BMP pathway are crucial for vertebrate head development, as mutations in them are associated with midline defects of the head. The interaction of these genes in the morphogenesis of the fruitfly head suggests that the regulation of head formation may be conserved across metazoans.