Homeotic genes control the development of embryonic structure by coordinating the activities of downstream 'target' genes. The identities and functions of target genes must be understood in order to learn how homeotic genes control morphogenesis. Drosophila midgut development is regulated by homeotic genes expressed in the visceral mesoderm, where two of their target genes have been identified. Both encode secreted proteins. The Ultrabithorax (Ubx) homeotic gene activates transcription of the decapentaplegic (dpp) gene, which encodes a TGF beta class protein, while in adjacent mesoderm cells the abdominal-A (abd-A) homeotic gene activates transcription of the wingless (wg) gene, which encodes a Wnt class protein. The homeotic genes Antennapedia (Antp) and Sex combs reduced (Scr) act in more anterior midgut regions. Here we report the identification of another homeotic gene target in the midgut mesoderm, the teashirt (tsh) gene, which encodes a protein with zinc finger motifs. tsh is necessary for proper formation of anterior and central midgut structures. Antp activates tsh in anterior midgut mesoderm. In the central midgut mesoderm Ubx, abd-A, dpp, and wg are required for proper tsh expression. The control of tsh by Ubx and abd-A, and probably also by Antp, is mediated by secreted signaling molecules. By responding to signals as well as localized transcription regulators, the tsh transcription factor is produced in a spatial pattern distinct from any of the homeotic genes.