It is well known that the Dpp signal transducer Mad is activated by phosphorylation at its carboxy-terminus. The role of phosphorylation on other regions of Mad is not as well understood. Here we report that the phosphorylation of Mad in the linker region by the Wg antagonist Zw3 (homolog of vertebrate Gsk3-β) regulates the development of sensory organs in the anterior-dorsal quadrant of the wing. Proneural expression of Mad-RNA interference (RNAi) or a Mad transgene with its Zw3/Gsk3-β phosphorylation sites mutated (MGM) generated wings with ectopic sensilla and chemosensory bristle duplications. Studies with pMad-Gsk (an antibody specific to Zw3/Gsk3-β-phosphorylated Mad) in larval wing disks revealed that this phosphorylation event is Wg dependent (via an unconventional mechanism), is restricted to anterior-dorsal sensory organ precursors (SOP) expressing Senseless (Sens), and is always co-expressed with the mitotic marker phospho-histone3. Quantitative analysis in both Mad-RNAi and MGM larval wing disks revealed a significant increase in the number of Sens SOP. We conclude that the phosphorylation of Mad by Zw3 functions to prevent the self-renewal of Sens SOP, perhaps facilitating their differentiation via asymmetric division. The conservation of Zw3/Gsk3-β phosphorylation sites in vertebrate homologs of Mad (Smads) suggests that this pathway, the first transforming growth factor β-independent role for any Smad protein, may be widely utilized for regulating mitosis during development.