The halteres and wings of Drosophila are homologous thoracic appendages, which share common positional information provided by signaling pathways. The activity in the haltere discs of the Ultrabithorax (Ubx) Hox gene establishes the differences between these structures, their different size being an obvious one. We show here that Ubx regulates the activity of the Decapentaplegic (Dpp) signaling pathway at different levels, and that this regulation is instrumental in establishing the size difference. Ubx downregulates dpp transcription and reduces Dpp diffusion by repressing the expression of master of thick veins and division abnormally delayed and by increasing the levels of thick veins, one of the Dpp receptors. Our results suggest that modulation in Dpp expression and spread accounts, in part, for the different size of halteres and wings.