Hox factors are key regulators of distinct cells, tissues, and organs along the body plan. However, little is known about how Hox factors regulate cell-specific gene expression to pattern diverse tissues. Here, we show an unexpected Hox transcriptional mechanism: the permissive regulation of EGF secretion, and thereby cell specification, by antagonizing the Senseless transcription factor in the peripheral nervous system. rhomboid expression in a subset of sensory cells stimulates EGF secretion to induce hepatocyte-like cell development. We identified a rhomboid enhancer that is active in these cells and show that an abdominal Hox complex directly competes with Senseless for enhancer binding, with the transcriptional outcome dependent upon their relative binding activities. Thus, Hox-Senseless antagonism forms a molecular switch that integrates neural and anterior-posterior positional information. As the vertebrate senseless homolog is essential for neural development as well as hematopoiesis, we propose Hox-Senseless antagonism will broadly control cell fate decisions.