LIM domains function as bridging modules between different members of multiprotein complexes. We report the cloning of a LIM-containing gene from Drosophila, termed Dlmo, which is highly homologous to the vertebrate LIM-only (LMO) genes. The 3' untranslated (UTR) of Dlmo contains multiple motifs implicated in negative post-transcriptional regulation, including AT-rich elements and Brd-like boxes. Dlmo resides in polytene band 17C1-2, where Beadex (Bx) and heldup-a (hdp-a) mutations map. We demonstrate that Bx mutations disrupt the 3'UTR of Dlmo, and thereby abrogate the putative negative control elements. This results in overexpression of Dlmo, which causes the wing scalloping that is typical of Bx mutants. We show that the erect wing phenotype of hdp-a results from disruption of the coding region of Dlmo. This provides molecular grounds for the suppression of the Bx phenotype by hdp-a mutations. Finally, we demonstrate phenotypic interaction between the LMO gene Dlmo, the LIM homeodomain gene apterous, and the Chip gene, which encodes a homolog of the vertebrate LIM-interacting protein NLI/Ldb1. We propose that in analogy to their vertebrate counterparts, these proteins form a DNA-binding complex that regulates wing development.