Two classes of glial cells are found in the embryonic Drosophila CNS, midline glial cells and lateral glial cells. Midline glial development is triggered by EGF-receptor signalling, whereas lateral glial development is controlled by the gcm gene. Subsequent glial cell differentiation depends partly on the pointed gene. Here we describe a novel component required for all CNS glia development. The tramtrack gene encodes two zinc-finger proteins, one of which, ttkp69, is expressed in all non-neuronal CNS cells. We show that ttkp69 is downstream of gcm and can repress neuronal differentiation. Double mutant analysis and coexpression experiments indicate that glial cell differentiation may depend on a dual process, requiring the activation of glial differentiation by pointed and the concomitant repression of neuronal development by tramtrack.