During development, a small number of conserved signaling molecules regulate regional specification, in which uniform populations of cells acquire differences and ultimately give rise to distinct organs. In the Drosophila eye imaginal disc, Wingless (Wg) signaling defines the region that gives rise to head tissue. JAK/STAT signaling was thought to regulate growth of the eye disc but not pattern formation. However, we show that the JAK/STAT pathway plays an important role in patterning the eye disc: it promotes formation of the eye field through repression of the wg gene. Overexpression of the JAK/STAT activating ligand Unpaired in the eye leads to loss of wg expression and ectopic morphogenetic furrow initiation from the lateral margins. Conversely, tissue lacking stat92E, which cannot transduce JAK/STAT signals, is transformed from retinal tissue into head cuticle, a phenotype that is also observed with ectopic Wg signaling. Consistent with this, cells lacking stat92E exhibit ectopic wg expression. Conversely, wg is autonomously repressed in cells with hyperactivated Stat92E. Furthermore, we show that the JAK/STAT pathway regulates a small enhancer in the wg 3' cis genomic region. As this enhancer is devoid of Stat92E-binding elements, we conclude that Stat92E represses wg through another, as yet unidentified factor that is probably a direct target of Stat92E. Taken together, our study is the first to demonstrate a role for the JAK/STAT pathway in regional specification by acting antagonistically to wg.