Salivary gland formation in the Drosophila embryo is linked to the expression of the homeotic gene Sex combs reduced (Scr). When Scr function is missing, salivary glands do not form, and when SCR is expressed everywhere, salivary glands form in new places. However, not every cell that expresses Scr is recruited to a salivary gland fate. Along the anterior-posterior axis, the posteriorly expressed proteins encoded by the teashirt (tsh) and Abdominal-B (Abd-B) genes block SCR activation of salivary gland genes, and along the dorsal-ventral axis, the secreted signaling molecule encoded by decapentaplegic (dpp) prevents activation of salivary gland genes by SCR in dorsal regions of parasegment 2. We have identified five downstream components in the DPP signaling cascade required to block salivary gland gene activation. These components include two known receptors, the type I receptor encoded by the thick veins (tkv) gene and the type II receptor encoded by the punt (put) gene; two of the four known Drosophila members of the Smad family of proteins which transduce signals from the receptors to the nucleus, Mothers against dpp (Mad) and Medea (Med); and, finally, a large zinc-finger transcription factor encoded by the schnurri (shn) gene. These results reveal how anterior-posterior and dorsal-ventral patterning information is integrated at the level of organ-specific gene expression.