Endoderm induction in Drosophila is mediated by the extracellular signals Decapentaplegic (Dpp) and Wingless (Wg). We discovered a secondary signal with a permissive role in this process, namely Vein, a neuregulin-like ligand that stimulates the epidermal growth factor receptor (EGFR) and Ras signaling. Dpp and Wg up-regulate vein expression in the midgut mesoderm in two regions overlapping the Dpp sources. Experiments based on lack of function and ectopic stimulation of Dpp and EGFR signaling show that these two pathways are functionally interdependent and that they synergize with each other, revealing functional intertwining. The transcriptional response elements for the Dpp signal in midgut enhancers from homeotic target genes are bipartite, comprising CRE sites as well as binding sites for the Dpp signal-transducing protein Mad. Of these sites, the CRE seems to function primarily in the response to Ras, the secondary signal of Dpp. We discuss the potential significance of why an inductive process might use a secondary signal whose function is intertwined with that of the primary signal.